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Nonferrous metals show resiliency in January.

SDB Staff January 29, 2013

Copper, aluminum, nickel, zinc and lead prices each have shown resiliency, with prices largely showing forward momentum through the end of 2012. “We have seen quite a rally (in prices) in nonferrous grades,” a scrap metal dealer based in the Midwest says.

An East Coast broker adds that copper, aluminum and nickel prices are up significantly from where they were one year ago.

Although prices have improved, optimism is muted. Several scrap dealers say industrial generation is still down and that volumes are off from early 2012.

Another Midwestern scrap metal recycler predicts that nonferrous scrap metal prices will “muddle” along before seeing a sizable improvement by the second quarter of 2013.

The improvement in pricing follows several months of sluggishness in early 2012, when prices trended toward the downside.

A scrap dealer based in the eastern United States says he sees markets for copper scrap improving. Part of his optimism stems from what he describes as a more stable trading environment. He says copper prices are now moving within a more tradable range of $3.50-per-pound level. “Stable COMEX (Chicago Mercantile Exchange) prices have helped,” he adds.

This stability has given scrap suppliers the chance to sell their products steadily, rather than wait for a sharp price swing to spur buying.

The scrap dealer says he has a bullish outlook toward copper scrap markets during the first quarter of 2013. “November has been a great month for us,” he says. “Consumers are coming back, and the flow of material has been solid. It is a very positive market right now.”

He acknowledges that some traders are holding onto their copper, waiting for higher prices; though it appears these speculators are fewer in number than seen earlier this summer.

Despite the strength in nonferrous metals prices, demand from refiners is still less than robust, sources say. One scrap metal recycler says he received a sizable order of copper from a customer, but has yet to supply most of the material because of the lack of orders for finished product. “Ultimately, it rests on our customers selling product,” he says of his ability to move material.

However, he adds that a sizable turnaround appears close at hand. “Some of these customers we supply need just a few more orders to significantly boost their schedules,” the dealer says.

Another recycler based in the Midwest says that while overall production and scrap volumes are down, the utility and wire businesses are both in good shape. He expects these sectors to be fairly healthy for a few more months.

A number of recyclers say many domestic consumers had been reluctant to carry a large scrap inventory at the end of the year. Some of those orders are anticipated to arrive early in 2013.

Regarding aluminum, the automotive sector continues to be a source of hope. While earlier in 2012 some skeptics said they felt the automotive market would be dragged down by the overall malaise in the U.S. economy, more recently scrap dealers say this sector has held up well, which has led to a steady flow of aluminum scrap.

A large handler of aluminum scrap on the East Coast says more scrap dealers are “feeling the urge to sell.” He adds that there is “plenty of metal out there for them to meet their needs.”

The housing sector, which has long troubled aluminum markets, also is showing modest signs of an improvement. While far from robust, the recent uptick in new housing starts has translated into a modest increase in orders from aluminum smelters selling into the housing sector.

Despite the modest improvement in prices, several aluminum scrap handlers are hedging their bets in regard to the near-term market. “Business is slow and spotty with customers,” one East Coast broker says. “Buyers are coming in at opportune times, with their eyes toward making sure inventories are low at the end of the year.”

As for generation, the East Coast broker describes it as inconsistent.

One of the most optimistic sources is a large nonferrous exporter operating on the East Coast. He says his representatives in China say copper scrap inventories are down considerably. “The message is that they need metal. Business in China is improving and a new [central committee] is now in place.”

He adds that stimulus packages enacted by the incoming government in China should boost infrastructure spending, which should result in better demand for scrap metal. While he says he expects an improvement in nonferrous metals markets, he says it like will occur after Chinese New Year in mid-February.

 

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