*Average monthly settlement price, cash buyer; U.S. dollars per metric ton. Source: London Metal Exchange, www.lme.comWhile sources throughout the United States say copper scrap prices have been volatile through the middle of February, the overall trend has been toward the upside. In the middle of February, copper scrap was priced at roughly $4.50 per pound, a 25-cent increase from January. This trend has many industry observers speculating that copper scrap could reach $5 per pound sooner than previously expected.
In light of the volatility in copper scrap pricing, many smaller scrap yards are keeping little inventory on hand. One scrap dealer in the East says that once the company gets a full load or even a half load of the material, it looks to move it.
The increase in copper scrap pricing comes despite the fact that Chinese consumers, key buyers for the material, have been less aggressive in their purchasing. One source says that while buyers for Chinese consumers are not buying clean copper, they are more aggressively buying lower-value electric motors. Another vendor says buyers for Chinese companies appear to be purchasing copper cathode as a way to avoid further stoking copper scrap prices.
Despite China’s smaller role in copper scrap markets currently, these buyers will likely have to re-enter the market in the near future, which could further boost prices for the material.
The typical slowdown associated with the Chinese New Year holiday also could be contributing to China’s relative absence in the copper scrap market, according to sources.
Despite escalating prices, inventory levels for copper as monitored by the exchanges in London, Shanghai and New York are climbing, according to a Bloomberg report. A number of overseas consumers of copper have been tightening their monetary policies in an effort to stave off inflation, and this could be a factor contributing to escalating inventories.
China’s dependence on copper scrap purchased through the open market is generating concern in that country. A recent report by the Chinese Ministry of Industry and Information Technology (MIIT) calls for a significant increase in the amount of recycled metals collected and processed in China. In a recent announcement, MIIT says China hopes to produce 12 million tons of recycled metals in 2015. The country generated 6.33 million tons in 2009.
MIIT notes that two producers of recycled copper have annual production of more than 100,000 tons. The government is looking to establish, by consolidation, several producers with an annual capacity of 100,000 tons. In its statement, MIIT says it would like the top 10 companies in the recycling industry to account for half of the total output by 2015. To accomplish this, the Chinese government is reportedly willing to provide financial support for leading producers to merge with smaller players.
Aluminum markets also have been sporting fairly good pricing. A scrap dealer in the Midwest says aluminum prices have been creeping upward after lagging through much of the most recent bull market. In the middle of February, aluminum was priced at roughly $1.12 per pound.
Movement of aluminum scrap continues to be good, though it is being driven by speculation on the COMEX and the LME (London Metal Exchange), rather than by traditional end markets.
Foul weather has had an effect on nonferrous metals at a time when generation is typically lowest, the first quarter of the year. Additionally, the U.S. economy is slowly coming out of a deep recession, meaning generation of prompt scrap has been slow.
“It is still a struggle getting material. It is awfully quiet this time of year,” a Midwest scrap dealer says.
(More information on nonferrous metal markets, including consuming industry reports and breaking news, is available at www.RecyclingToday.com.)