Nonferrous Department

Is Hoarding Mentality Holding On?

As December gave way to January and the new year, prices for most forms of nonferrous scrap remained at historically low levels. As prices for scrap aluminum, copper and nickel headed downward or, at best, inched upward, month after month in 1998, much speculation centered on the amount of scrap being withheld from the market by those awaiting better prices.

But with prices having remained depressed for so long, is there still a great deal of speculative hoarding taking place? “I think dealers are going to hold scrap until they see another nickel or so in copper and another two pennies in aluminum,” says one southern scrap processor.

He also notes that “flows are not good on either item. You’re just not going to have people moving stuff at these numbers unless they have to.”

Agrees a Midwestern nonferrous processor, “there always have been and always will be pure speculators holding onto their metal.”

There are some observers who believe that most such speculators have been slowly forced to sell off the material they had been holding, due to the duration of the price trough. With the subsequent collapse in ferrous scrap pricing, multi-material dealers seeking some sort of cash flow may be selling their copper inventories.

As copper prices headed back downward after a small spring rally, July brought the start of the ferrous scrap market collapse. For processors or dealers active in both segments who had been holding copper, it may have become apparent that if any cash was going to be generated at all, the copper piles would have to be sold at an unattractive price.