TREADING CAREFULLY
Nonferrous markets must be on the rebound, as there has been a noticeable increase in the number of reported metals thefts. This unfortunate phenomenon, which seemed to explode when copper, aluminum, stainless steel and other metals climbed to record highs, was greatly reduced when markets cratered at the end of 2008. However, during the summer and into the fall of this year, there seemed to be a noticeable uptick in material theft.
Although such thefts are not an official harbinger of better markets, they are somewhat of a gauge for the market for a number of nonferrous metals. But, looking into the near term, it might be wise to adopt a cautious attitude when it comes to the future direction of nonferrous metals markets.
Prices for copper have continued to strengthen, which, many would think, indicate a stronger market for the red metal going forward. Future copper prices are being pegged at fairly solid numbers. At the end of October, copper prices were at a 13-month high, according to Bloomberg News.
Recent figures from the Copper Journal show that copper reached slightly greater than $3 per pound as of Oct. 23, 2009, an increase of nearly 116 percent from prices at the end of 2008.
As global governments pour money into stimulus programs, copper and aluminum, as well as other metals, have benefitted as a result of new construction. But, if stimulus spending starts to slow down, there could be a significant decline in prices for these metals.
Other reports take a more cautious tone, warning that imports of copper to China could drop significantly in the coming months. According to a Bloomberg report, a spokesman for Pan Pacific Copper is quoted as saying that imports of refined copper could decline by as much as 46 percent as prices far outpace demand for the metal and its inventory levels climb.
The rally in copper was fueled by strong buying by Chinese interests, which resulted in copper imports that climbed to nearly 2.3 million tons during the first eight months of 2009. However, the Chinese government has singled that the strong buying will moderate in the near future, as orders have exceeded actual demand.
Also, copper markets have benefited from a weak U.S. dollar. If the U.S. dollar starts to strengthen for a sustained period, then copper could feel the effects.
Copper is not the only nonferrous grade that has enjoyed strong upward price movement. Aluminum and nickel have seen their prices climb significantly during the past several quarters. However, similar to copper, some underlying issues could warrant a sharp retrenchment in pricing for these nonferrous metals.
Even with aluminum producers working to significantly cut their production, a sizable inventory of aluminum remains on the market, which could work to soften prices for the metal.
There is good news for aluminum, however. According to a report from RNCOS, an industry research firm based in India, aluminum is rapidly gaining preference over other metals because of its light weight, strength and recyclability.
According to the report, titled “U.S. Aluminum Market Analysis,” the packaging industry is one of the most aluminum intensive sectors in the U.S., consuming nearly 23 percent of the aluminum produced in the country. RNCOS attributes this to U.S. citizens’ realization of the energy- and cost-saving advantages of aluminum recycling.
RNCOS estimates that by 2015, aluminum beverage container recycling rates will reach 75 percent, which will only boost the demand for secondary aluminum in the country.
In terms of the general economy, while many economists have said the worst of the recession has passed, improvements likely will be slow. Also, some economists say the global economy could decline into a double-dip recession, driving down demand and pricing for nonferrous metals.
(Additional news about nonferrous scrap, including breaking news and consuming industry reports, is available at www.RecyclingToday.com.)