BIR Non-Ferrous World Mirror May 2014

Global – The following article is based on the latest Non-Ferrous Metals World Mirror produced by the BIR world recycling organisation for the benefit of its members.

Latest developments underline the wide-ranging impact of macro events on industry in general – and therefore, of course, on the recycling industry. The result of the recent election in India, for example, has been welcomed by industry at large as the BJP swept to power on promises of inclusive, socio-economic development and of clean governance. The Indian rupee has since strengthened to below Rs 59 to the US dollar compared to more than Rs 68 in August last year while foreign institutional investors have also pumped in billions of dollars.

The crisis in Ukraine, meanwhile, has cast a shadow over economic progress in the Nordic Countries owing to the threat of deteriorating relations with Russia. The weaker rouble is already said to have affected export competitiveness. Finland is thought to be particularly vulnerable to the economic shock waves relating to Russian trade.

The Ukraine-Russia conflict is also identified as ‘the main concern’ for recyclers in the Middle East at present, with non-ferrous scrap traders hoping the crisis will be resolved as soon as possible without endangering global markets and metal prices, especially as the region has recorded significantly higher trading and export volumes of late when compared to the first quarter of this year.

In Russia itself, rising domestic consumption is creating ‘substantial deficits in copper, aluminium and lead’. While there is no import duty on scrap, VAT must be paid when scrap is brought into the country; however, it is believed this requirement ‘will most likely be removed in the near future’. Given the metal shortfalls, many Russian buyers have looked to obtain scrap from Ukraine, Poland and the Baltic States.

In Thailand, the internal upheaval and economic downturn have been reflected by a slump in car sales and falling operating rates at secondary aluminium smelters. In Brazil, meanwhile, economic activity has slowed further as the FIFA World Cup approaches, with the automotive sector carrying 45 days’ inventory and the secondary aluminium alloy market ‘on hold’. That said, Novelis’ newly-installed capacity in the country has helped to force aluminium scrap prices higher.

Japan’s consumption tax increase from 5% to 8% has been blamed for a 5.5% year-on-year drop in vehicle sales during April – the first decline in eight months. Although aluminium alloy production fell slightly, robust raw material demand and tight supply kept domestic aluminium scrap prices firm.

Meanwhile, fiscal reforms in Mexico are continuing to create uncertainty; some scrap yard operators have reportedly taken the decision to scale down their activities for now while others are suffering ‘a growing sense of anxiety’ over whether they are ‘documenting and taxing their operations in the right way’.

In China, interest for the scrap industry has centred around a proposal that has not been implemented: during the People’s Congress earlier this year, some members suggested that the government’s stimulus package should include a reduction of VAT on scrap recycling – ‘but three months have passed and no announcement of such an action has been made’.

In South Africa, meanwhile, draft amendments to the country’s ferrous and non-ferrous scrap export control guidelines have been gazetted for comment. South Africa’s domestic non-ferrous scrap market has slowed in recent weeks, with high prices being paid by processors to secure the limited volumes of scrap available.

In New Zealand too, competition remains ‘strong’ and margins are expected to come under ever more pressure owing to ‘the traditional cyclical slowdown in volumes as winter approaches’. Spreads have remained unaltered on No 1 and No 2 copper as well as bare bright in the USA, while prices have backed off with regard to UBC, Twitch and lead batteries.

In Europe, there has been evidence of strong demand for copper scrap at healthy prices as some works are lacking material. Stainless steel scrap prices have improved in France but ‘significant quantities remain in merchants’ yards’, while lead and zinc are still ‘the leading items of great interest’ in Italy because of a shortage of scrap. Meanwhile, the most recent VDM business climate survey conducted in Germany tends to suggest that conditions have deteriorated for the metals trade in the second quarter of this year. However, the outlook is considered to be far more positive.