NOT TOO BAD
As glib as it may seem, it appears that markets for most nonferrous metals fall into the “not too bad” camp. Price and movement are good although generation is down. Prices climbed steadily for copper, aluminum, stainless and several other nonferrous metals at the end of 2009 and into January of 2010.
Many copper dealers say inventory levels are the main driver behind increasing prices for the metal. At the end of 2009 there was concern that copper inventories had climbed too high, which would result in lower prices. However, toward the end of January 2010, reports indicate that LME inventory declined for the first time since late October 2009, boosting prices to nearly $7,500 per metric ton. Despite this recent decline, inventory levels remain above 500,000 metric tons.
Also affecting the market is the lack of available scrap supply. Whether because of inclement weather or a struggling global economy, supply shortages should contribute to strong pricing for copper scrap.
A report by Australia-based Macquarie Bank forecasts that more copper will be delivered to China during the first two to three months of 2010, with imports expected to stay at the 800,000- to 850,000-metric-ton level for the quarter.
Domestically, aluminum markets in the Midwest face a mixed bag. One vendor notes a bullish atmosphere, saying, “People believe aluminum will go higher. However, prices have outpaced the relationship. It is pretty speculative.”
The degree of speculation is cause for concern for another Midwestern recycler whose company handles a significant amount of aluminum. “Our production is slowing down,” he says, adding that financial markets are controlling much of the metal, which contributes to his concern that there will be a sharp downward correction.
According to a report by the U.K.-based consulting group MEPS, some European stainless producers have extended their Christmas stoppages into the middle of January and many will restrict production during the next few months. This should help to alleviate oversupply pressures in the market.
The MEPS report notes that LME stainless steel inventory climbed above 150,000 metric tons in January. “Despite the weak fundamentals, we believe that nickel prices will rise in January. Fund re-weighting will, almost certainly, put upward pressure on nickel values,” according to MEPS.
A large exporter of stainless scrap reports strength in the offshore market and demand for the material.
“Optimism in the market is likely to grow during 2010 from expectations of escalating Chinese demand,” according to MEPS. “This should push prices higher during the first half of 2010. However, oversupply issues are likely to persist over the next 12 months. Consequently, cash nickel figures could slip during the final few months of the forecast period.”
The MEPS report continues, “Restocking by the distributors could boost sales volumes during the first half of 2010. This, coupled with rising raw material costs, is expected to push stainless steel prices higher over the same time span. However, real consumption is unlikely to recover significantly over the forecast period.”
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