Nonferrous Department

CONTINUED ASCENT

So much for that correction in nonferrous metals. Moving into the spring, prices for copper, aluminum and stainless steel all are holding up fairly well. Demand for these metals, while not necessarily surging, remains strong enough to keep scrap dealers scrambling to find material to fill orders. Prices now look to be moving in a narrower trading range.

While prices have been improving, supply remains tepid. This lack of supply continues to be one of the most problematic aspects of the market right now. Across the board, scrap dealers are reporting limited supplies of available material.

Part of the reason is that during the earlier run-up in markets, which ended in late 2008, much of the obsolete scrap was consumed, leaving less material available to meet present needs. Additionally, the manufacturing base in the United States continues to move in fits and starts. This is having a two-fold impact on the recycling market: Reduced manufacturing means less industrial and prompt scrap is available from manufacturers, and consumer purchases have been muted.

The manufacturing slowdown continues despite a number of stimulus programs that were expected to boost durable goods production.

China, which has been one of the key drivers for a number of nonferrous metals, especially copper, may be easing back its purchases for 2010. Recent reports show that copper imports to China stand at 322,300 metric tons for February 2010, a 2 percent decline from the same time in 2009.

For copper scrap, total imports for February stand at 64,400 metric tons, down from the previous month’s figure of 97,600 metric tons.

On the domestic front, several copper scrap consumers had allowed their stocks to run down by the end of last year. Many of these same consumers are attempting to rebuild inventories, helping to keep copper scrap prices fairly stable. However, with less scrap available on the market, many of these consumers are struggling to find enough material to meet their inventory needs.

Price ranges for copper are modulating at the present, with fluctuations not as extreme as they were throughout the past several months. Although prices are moving in a narrower range, one dealer of copper scrap says the metal’s price has gotten “way ahead of itself.”

“Demand and recovery are not where they need to be right now,” a Midwestern scrap dealer says. While demand is moderate, an increase without a commensurate growth in supply could help push copper prices even higher.

While markets have held up fairly well, several copper scrap dealers say they are seeing signs that copper markets may start to turn downward. One East Coast scrap metal recycler notes that as of the middle of March he has been seeing supply and demand “really drop off.” Whether that is a short-term correction or the possible start of a more pronounced decline is uncertain.

Another copper scrap dealer says there is the possibility of a “buy until May and then go away” scenario. If a stronger run helps to keep prices for copper healthy through the spring and then starts to really back off for the second half of this year, scrap recyclers may face challenges as orders dry up.

Several recyclers list a host of variables that could put the copper market (as well as a bevy of other nonferrous metals) in a prolonged downturn: the U.S. economy, a manufacturing base that continues to struggle, a prolonged pullback in buying by Chinese metals producers and an unemployment rate that continues to linger in the double-digit level.

Stainless steel markets also are affected by supply shortages. “There is no nickel in the U.S.,” one source notes. Even with fairly high prices on the London Metal Exchange for nickel, not much can be found. “There is basically no activity right now.”

At the same time, a number of service centers have seen their inventory levels run down and are looking to restock; but, as is the case with copper, very little scrap is available.

Meanwhile, export markets are not playing much of a factor in the market.

(More information on nonferrous metal markets, including consuming industry reports and breaking news, is available at www.RecyclingToday.com.)