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Does 2016 look “Blue”?

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by - 3/4/2016 5365 Views

Non-Ferrous Scrap

The current economic health of China is considered as one of the major factor, by a majority of the recyclers, for the weakening of nonferrous scrap markets. Adding to this factor, is the level of aluminum production in China, which recyclers and others say, has been threatening U.S. producers and the scrap industry as well for months together now.

The oversupply is seeing a drastic increase in the imports of Chinese aluminum into the United States. Figures from the Aluminum Association, Arlington, Virginia, indicate U.S. imports of semi-fabricated aluminum products from China grew 115 percent from 2012 through 2014. The association says the trend continued in 2015. The excess of semi-fabricated aluminum also has affected export demand for scrap, say David Chiao of Atlanta-based Uni-All Group Ltd. and president of the Bureau of International Recycling (BIR) Nonferrous Division.

Furthermore Chiao says, for the past year or so, aluminum consumers in China have increasingly used cheaper primary aluminum ingot rather than more expensive aluminum scrap from the United States to produce aluminum. These days, he says some U.S. consumers may be doing the same. He says the U.S. dollar’s continued strength has attracted metal imports and blunted scrap exports, particularly to Asia; but consumers in India have been a source of demand for some aluminum, stainless steel and yellow brass scrap, they are not demanding the wide spectrum of products that Chinese consumers sought in years past.

Scrap recyclers have thus far spent the winter of 2015-2016 coping with prices, narrower margins and tighter supply across the scale. According to one of the recycler based in California, the possible cures for falling volumes would be the shuttering of facilities as the difficult conditions continue to linger, he says. “Some competitors are exiting the market due to financial issues, and this is helping flows at existing yards to some degree,” he comments.

The domestic demand for prime and secondary grades of aluminum scrap is described as stable by one Midwest-based recycler. He says, “I don’t think there’s a lot of scrap out there, so supply and demand is pretty well lined up now, In general, the lack of supply is lower than previous years across all nonferrous and ferrous items this year, and you’re seeing it get worse as we approach the end of the year.”  He continues to say, “If we do have a big dip in volumes because of the weather or for any other reason,” the recycler continues, “many will find it hard to get the scrap they need.”

(Source: London Metal Exchange, www.lme.com.)

Copper scrap pricing in the first two weeks of 2016 has pointed to yet another dumb year, as the market continues to show restrained demand for copper and brass compared with the prior glorious years of robust Chinese economic growth. For copper to regain any price momentum, the necessary adjustments likely will have to be made on the supply side. In the scrap market, that already has been happening, according to many recyclers. However, primary copper production and existing inventories of finished and semi-finished copper may take longer to respond to the new demand level in China.

Aluminum pricing also has been on a downward trend, with many producers of the light metal having difficulty managing through the declining price environment as well as facing a stiff competition from increased, finished and semi-finished exports from China. Profitability has been hard to come by among publicly traded scrap recycling firms in late 2015, and managers at these firms as well as owners of privately held companies all appear to be bracing for a year of reduced volumes and tight margins in the nonferrous scrap sector in 2016.

During the entire period of 2015, London Metal Exchange (LME) prices per metric ton of copper, aluminum and nickel were on a downward slide, with the price of nickel dropping most significantly, having lost almost 35 percent of its value between January and November. LME prices for copper declined by about 17 percent over the same period, while aluminum prices, seemingly the most stable of the three, have fallen by about 13 percent during the first 11 months of the year.

During mid-January overall economic news consisted of a mixture of encouraging employment numbers in the United States in the face of declining global stock prices, falling commodities prices and widespread concern by economists and bank analysts about the condition of China’s economy and the opacity of its economic data. In the present given situation, the two important key words to be considered are Focus & Determination. It has not been scripted that that the global economy is heading uniformly downward, but scrap recyclers are among those who seem convinced that they are better off preparing for the worst in 2016 while still holding out hope that pleasant surprises is just around the corner.

Category : Metal

Tags : Non-Ferrous Scrap, Aluminium Scrap, Copper Scrap, Non-Ferrous Scrap Market, Non-Ferrous Scrap Price

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About Georgy Abraham

As the bright morning of 28th May dawned in the year 1972, in the fulfillment of time according to the plan & will of Almighty Godbrought me forth into this world and I was brought up & educated in Orissa. My parents provided me with the best of education in an English medium school with high standa .... more info


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