Nonferrous Commodity Report

The U.S. economy may be sluggish, but copper has found upward momentum. Various industry reports indicate that copper prices are close to their all-time high price of nearly $8,800 per ton. Supply disruptions in the marketplace, particularly strikes at some mines, led the upward move.

Although the copper market remains strong, the weakening U.S. economy is creating uncertainty about many nonferrous metals looking ahead to the next several months. The relative strength of copper thus far, however, indicates a supply shortage for the red metal.

In addition to a weaker U.S. economy, China has indicated that it is seeking to raise fuel and power prices, which could result in a slowdown in overall metals markets in China, which ultimately could result in slowing demand for scrap metal being shipped to the country.

One issue that is becoming the norm is the general volatility of many of the more widely used metals, such as copper, nickel and aluminum. During the recently concluded Bureau of International Recycling (BIR) World Recycling Conference, Martin Abbot, the London Metal Exchange’s chief executive, noted that volatility is inherent in the commodity marketplace, and the exchanges are not the reason for the fluctuations in prices for many base metals.

The stainless steel market, on the other hand, is still showing signs of slowing down, albeit at a slower pace than it exhibited during the past several years. During the BIR meeting, Markus Moll, a senior market analyst with Steel & Metals Market Research of Austria, pointed out that global stainless production would increase by 4 percent this year. While growth was still moving at a good clip, Moll noted that China would likely not reach the double-digit growth that was predicted earlier. Despite the ease in China’s growth, he added that China’s stainless steel production should average around 9 percent growth each year for the next five years. Additionally, stainless steel production in India should surpass that of the growth reduction.

Michael Wright, chairman of BIR’s Stainless Steel and Special Alloys Committee, summarized the global stainless market as cautionary. "Stockists are working from hand to mouth and are reluctant to hold high inventories in view of the uncertain nickel prices and exploding chrome and iron prices," he said.

Also during the BIR World Recycling Conference, Barry Hunter, from Hunter Alloys LLC, based in the U.S., noted that while a relative absence of Chinese buyers marked a significant change in the market, the need for scrap in the near future may result in greater competition for stainless steel scrap.

Another BIR speaker noted that stainless steel production in China was down 12 percent during the first quarter of this year relative to the last quarter of 2007. However, despite the slip, the figures for the first quarter of this year were still up 30 percent from figures for the same time last year.

Adding to the overall expectations that short-term nickel and stainless steel scrap markets could struggle, recent figures from the International Nickel Study Group shows that production topped demand for April, the most recently reported month. This was the third straight month where global supply outpaced demand. A recent report by Bloomberg notes that the oversupply was the widest in eight months.

Several special alloys also are seeing some softness. The key reason has been the delay in airplane production, as a number of highly anticipated airplane launches have been pushed back. During the BIR meeting, a report from Stuart Freilich of U.S.-based Universal Metal Corp., noted that demand for large volumes of titanium would recover either by late 2009 or by 2010.