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There is minimal good news for most nonferrous metals. Moving into the first quarter of 2009, the combination of problems in the auto industry, residential housing market and the overall global economy are dashing the hopes that nonferrous metals will see a noticeable improvement during the first half of 2009.
Two of the top nonferrous metals—aluminum and copper—will likely see continued downward pressure on price in light of slowing demand from their end markets.
A number of analysts forecast aluminum will continue to remain weak throughout most of 2009. Goldman Sachs forecasts future three-month prices to continue to decline, with a possible price level as low as $1,300 per metric ton, compared to $2,020 per ton in December.
The accelerated decline in aluminum comes as both secondary and primary aluminum smelters continue to cut production to bring supply and demand back into balance. During the last quarter of 2008, a number of top aluminum producers announced sizable cuts in production. Rexam, Aleris, Alcoa, Century Aluminum and Arkansas Aluminum all have announced plans to either temporarily or permanently idle capacity.
In the misery-loves-company department, the challenges in the aluminum markets are not limited to the United States. Many European and Asian companies also are taking drastic steps to reduce overall capacity. In early December, Madras Aluminum, part of the Indian company Vedanta Group, announced that it would halt aluminum production at one of its facilities in India. This follows the company’s earlier decision to reduce production by 60 percent in light of falling prices on the London Metal Exchange (LME).
According to published reports, more than one-fourth of aluminum smelters presently operating are operating at a loss. The number may be even more staggering for Chinese producers, as one consultant notes that roughly 70 percent of the aluminum smelters in China are operating at a loss.
The well-documented problems in the auto and housing industries have helped push aluminum inventories to a 14-year high of around 2 million metric tons, according to one report.
Copper also is slated to continue its downward arc. After cresting above the $4-per-pound level in 2008, commodity analysts continue to downgrade expected average prices. Some analysts forecast an average price of less than $1.50 per pound. Meanwhile, prices have fallen even further than that, with some buyers reporting paying nearly 80 cents per pound.
Goldman Sachs forecasts the three-month future price on copper will decline to around $2,700 per metric ton, compared to its present price of $3,835 per metric ton.
As of mid-December of 2008, copper prices were at four-year lows. Meanwhile, copper inventories, notably on the LME, have grown significantly, which continue to keep a cap on price increases for the metal. One report has copper inventories on the LME increasing by more than 60 percent in 2008.
Despite the less-than-upbeat news, the sharp drop in prices has resulted in more producers removing capacity from the market, which should help when a recovery kicks in.
Nickel markets also saw pricing erode through the back half of 2008, and a number of the larger producers also have opted to reduce their supplies as a way to establish a floor on prices.
(Additional news about nonferrous scrap, including breaking news and consuming industry reports, is available online at www.RecyclingToday.com.)