Copper Tumbles to Three-Week Low as Industrial Metals Decline

Steve Solomon, Solomon Metals Corp.

The supply of copper scrap seems to be relatively consistent and buying metals is not as much a problem now. The markets have recovered from the large fall in September. Now that copper is back in the $3.50 range, material is back flowing again.

Aluminum prices aren’t changing, regardless of what the market is doing and tending to get weaker. We won’t see any kind of major movement in the aluminum prices maybe until the end of the first quarter of 2012, assuming that we get bad weather in the Northeast. For the next two months, at least going into the Asian markets, we see a definite slowdown as they slow their buying down ahead of the Chinese New Year, combined with what we believe to be less demand in the Chinese market than in previous years. It seems that there is less money available for Chinese buyers to buy, and it has become sort of a ”seller beware” situation on scrap going to China, making sure the buyers are well financed and prepared to stand up to whatever contracts you have with them. We don’t want to revisit what happened several years ago.

The amount of scrap yards that are shipping directly to China is down quite a bit. There are less Chinese buyers out there canvassing the yards, buying scrap. The bigger buyers are still out there buying scrap on a regular basis. It is important even with the larger companies that we keep a close eye on their creditworthiness. As sellers, there has been a lot of changeovers in the way they buy their scrap, especially in mixed type loads under their new regulations and what metals can be mixed in what loads. Knowing all that information and how material needs to be packaged in China now is very, very important in doing continuous business.

Domestic ingot makers are consistent. It appears the amount of material that they are buying now is in relative equilibrium to the material that is available. There does not seem to be much ingot-maker metal going overseas. Most of it is staying domestically and they are buying it at prices as they need to. They haven’t been going overboard on pricing.

Here in the Northeast, we have had very good weather. If the weather turns bad and there is a lot of snow and continued bad weather, it will slow material flow. At the moment, however, material is flowing freely. There is material to buy. The only slowdown in material is price related and that was probably occurring more so when the copper price was in the low $3 range. Now that we are back into the mid-$3 range, at the moment, material is being sold.

The aluminum secondary market is very weak. The aluminum primary market isn’t strong either. In general, aluminum prices are dull. It is the same story with stainless steel. Orders are done through the end of this year. There is not a lot of hope for the very beginning of the year. The nickel market has been very slow too.

12/5/2011
 

Copper scrap markets continue to slump, falling nearly 30 percent from the high seen in early 2011.

The lack of buying from China, the world's largest consumer of copper scrap, is the reason behind the decline. China has been the beacon of hope for many scrap dealers in recent years. More recently, however, exporters find these same markets closed to new purchases. In addition, container shipments of copper scrap, as well as those of other commodities, are being held up by customs agents at ports in southern China.

One large exporter says he has 100 containers tied up at Chinese ports for a number of reasons, including differences in duty charges and an alleged lack of grade consistency. The exporter says Chinese customs agents claim that mixed loads of scrap metal fail to meet criteria for a clean container load.

Reflecting the slowdown in copper scrap shipments into China, prices continue to decline, with one source saying October prices are near $3.30 per pound on the Chicago COMEX. This is a significant decline from a few months ago, when prices for the metal were near $4 per pound.

The Wall Street Journal reports that, during the recently concluded International Copper Study Group meeting in Lisbon, Portugal, the deputy director for the Copper Department for the China Nonferrous Metals Industry Association announced China had nearly 2 million metric tons of copper scrap in inventory at the end of 2010.

This previously unmentioned inventory figure is not a surprise to many recyclers, however, who have suspected that China was building its inventory of the metal. However, it does confirm that inventories are far greater than what has been reported previously.

According to several recyclers, China is not likely to aggressively re-enter the market for more copper scrap during the next several months. A Midwestern scrap processor says copper markets will likely be challenging through the rest of 2011 and the first quarter of 2012.

Aluminum markets also are seeing some challenges, though several dealers say markets are not as difficult as those for copper. Domestic demand remains stable to strong. Despite modest price declines, most vendors say they are not having difficulties moving material.

Nonferrous metals markets are being affected by a number of macro-economic issues. During the Institute of Scrap Recycling Industries Inc. (ISRI) Commodity Roundtables in late September, several speakers listed a number of economic indicators that would pose challenges for secondary metals. Jason Schenker of Prestige Economics, Austin, Texas, said that while copper growth remained solid globally, there were inflationary pressures that were not likely to ease in the near term.

On the domestic front, Schenker added that while there are fewer ingot makers and copper foundries than there were two years ago, they are in healthier shape than in the past.

A promising sign for exporters could be the return of the Japanese market, as the country looks to rebuild from the earthquake and tsunami earlier this year. Several speakers said that during the next 12 to 18 months, this demand from Japan should help markets for secondary metals.

Bruce Jasiewicz with the steel service center O'Neal Steel, Birmingham, Ala., said nickel/stainless markets had a fairly promising long-term outlook. He said activity in the power generation and petrochemical sectors could help strengthen nickel and stainless metals markets, contributing to 5 to 10 percent growth in the next decade.

While promising, in the shorter term, stainless and nickel markets will be challenged, another speaker contended. Mark Parr with KeyBanc Capital Markets, Cleveland, said supply had caught up with demand and nickel could remain fairly soft through the fall and into the winter.

Also speaking at the nickel/stainless roundtable, Frank Santoro with Rochester, Pa.-based Cronimet USA, displayed caution, noting that there was more supply than demand for stainless steel currently. Production was slow, but there was still movement of scrap material, he added.

A number of roundtable attendees said consolidation and closures in the stainless steel industry, both in the U.S. and Europe, were likely to accelerate.

 By Silvia Antonioli     
  

Copper fell more than 2 percent on
Thursday as escalating worries about a Greek sovereign debt
default and a Euro collapse darkened market sentiment,
offsetting supply deficit concerns.
    Benchmark copper on the London Metal Exchange fell
about 2 percent to $7,760.25 a tonne by 0930 GMT from $7,885 at
the close on Wednesday, when it rose about 2 percent.
    Earlier, it hit a session low of $7,673 per tonne.
    The metal used in power and construction rose by about 15
percent in the last 30 days but is still about a quarter down
from a record high of $10,190 a tonne hit on February.
    "Today the escalating debt crisis in the Euro zone is
weighing on all commodities; the EU has frozen payments to
Greece and if Greek people say no at the referendum Greece is
bankrupt," Commerzbank analyst Daniel Briesemann said.
    "The fundamentals should support copper and other metals:
inventories have been falling across the board lately, Chinese
imports are healthy and cancelled warrants have been rising but
commodity markets at the moment are almost ignoring
fundamentals. They are politically-driven."
     The leaders of Germany and France told Greece on Wednesday
it would not receive another cent in European aid until it
decides whether it wants to stay in the euro zone.

    Greece could face bankruptcy if the population ends up
voting against the European Union's latest financial aid package
in a referendum, the chairman of the Eurogroup countries said on
Tuesday.
    European leaders were preparing for the possibility of
Greece leaving the euro zone to preserve the 12-year-old single
currency.
    A stronger dollar against a basket of currencies was also
weighing on metals.
    A stronger dollar makes dollar-priced commodities such as
metals costlier for holders of other units.
   
       
 
   
    STILL ROBUST
    From a fundamental point of view things looked brighter.
    Declining copper ore grades and strike actions at some of
the largest copper mine have cut supply significantly this year.
    Freeport McMoRan Copper & Gold's massive Grasberg
mine in Indonesia is producing copper at 5 percent of its full
capacity, a senior official at the energy and mineral resources
ministry said.
    Also a decline in metals stocks and a rise in cancelled
warrants in the last few weeks underlined
demand for industrial metals was still robust.
    Copper inventories in LME-monitored warehouses
fell by 1,150 tonnes to 422,125 tonnes, the lowest since
February, latest data showed. Inventories have fallen by about
10 percent in the last 5 weeks.
    "If we look at industrial metals' specific fundamentals, we
find that they are mostly positive for prices," Credit Suisse
said in research note.
     "For instance, inventories of aluminum, copper, nickel,
tin and even zinc have continued to fall. Availability is
deteriorating... This positive fundamental backdrop contrasts
the prevailing uncertainty regarding the economic outlook and
the policy measures surrounding the European debt crisis."
    In other metals, aluminium was at $2,138 from $2,127
at the close on Wednesday and zinc , used to
galvanize steel, was at $1,918.75  from $1,927
a tonne.
    Battery material lead was at $1,999.75
from $2,024; tin was at $21,875 from $22,000 and
nickel was at $18,550 from $18,580.

Nov 3, 2011
 

By Bloomberg News

Chinese steel prices may extend their decline after slumping to the lowest in 10 months, prompting producers in the world’s biggest consumer of the alloy to bring forward maintenance or cut output, analysts said.

Hot-rolled coil was 4,538 yuan ($712) a metric ton on Oct. 14, the lowest since Dec. 20, according to researcher Beijing Antaike Information Development Co. The benchmark product has fallen since reaching 4,837 yuan at the end of August, data compiled by Bloomberg show.

Prices are dropping on concern a slowing global economy and moderating demand from construction in China may curb consumption. The decline is starting to squeeze profits, with Angang Steel Co., the largest Hong Kong-traded Chinese steelmaker by market value, saying on Oct. 14 its nine-month net income may have fallen 91 percent from a year earlier.

“Steel mills are not willing to cut production until they see negative margins – one reason we believe steel prices have not yet reached a bottom,” Shirley Zhao and Henry Liu, Hong Kong-based analysts at Mirae Assets Securities, said today in an e-mailed note.

Chinese steelmakers produced 1.64 million tons of the building material a day in the first 10 days of October, up 0.2 percent from the prior 10 days, Custeel.com said, citing data from China Iron and Steel Association released today.

Angang Falls

Angang Steel fell as much as 3.3 percent to HK$5.06 and traded at HK$5.10 as of 3:08 p.m. in Hong Kong, compared with a 1.5 percent gain in the benchmark Hang Seng Index. The company was downgraded to “neutral” from “trading buy” at OSK (Asia) Securities after it said its nine-month profit may have plunged.

Baoshan Iron & Steel Co., China’s biggest publicly traded steelmaker, said on Oct. 12 it kept the prices of most of its products unchanged for November, ending two months of increases.

“Prices charged by mills may be higher than spot prices, so steelmakers are still profitable at the moment,” said Hu Yanping, an analyst at Custeel.com. “They may have to cut production in future if prices continue to fall.”

This may result in lower output in November than this month, she said.

Maanshan Iron & Steel Co., China’s biggest train-wheel maker, plans to stop two of its blast furnaces for as long as nine days for inspection and a slab line for five days, Custeel.com said on its website. Angang Steel, along with some smaller mills, may also halt medium-plate production for 13 days, according to the industry portal.

October 17, 2011