BIR world mirror on non-ferrous metals October 2011

BIR – The following article is based on the latest Non-Ferrous World Mirror produced by the BIR world recycling body for the benefit of its members. The entire analysis can be downloaded at www.bir.org by organisation members

An acute sense of caution is pervading the non-ferrous metal markets in response to the unresolved sovereign debt crisis in the EU, sluggish growth in the USA and further monetary tightening in China.

In Europe, the focus of world attention at present as ministers grapple with the seemingly intractable debt crisis, scrap arisings have dropped sharply in response to steep declines in raw material prices. For copper scrap, manufacturers are short of material and so there is continuing pressure for a further reduction in discounts. In secondary aluminium, the market seems to be bottoming.

Meanwhile, recent price drops once again have tempted buyers – especially in Asia and Eastern Europe – to launch what has been described as ‘an avalanche’ of quality- and weight-related claims. The possibility of contract cancellations has also been mentioned by market experts in Europe.

In the individual markets, scrap traders in Germany have been complaining of sluggish business and weak prices. According to economic researchers, the country has largely succeeded in disconnecting itself – thus far at least – from turbulence in other parts of the continent. However, companies are anticipating a downturn in the coming months amid fears the wider financial and economic crises will spread.

In the Nordic Countries too, the economies are continuing to perform relatively well but developments elsewhere in Europe are having an impact. Growth forecasts for 2011 and to an even greater extent for 2012 have been revised downwards: Sweden is expected to grow 3.5-4% this year and 2% in 2012; Norway is predicted to achieve a growth rate of 2.5% in 2011; the Danish economy is expected to grow by 1.4% this year; and the Finnish economy is now expected to record annual growth of 3-3.5% in 2011 and 2% in 2012.

France has reported healthy demand for copper, with consumers struggling to find enough material to satisfy their consumption needs. Metal merchants with stocks bought at a high average price are generally opting to wait for an improvement in values before selling. The same observation, it is argued, can be applied to most forms of non-ferrous metal; nearly all the aluminium qualities are proving easy to sell at reasonably good discounts, it is noted.

Elsewhere in the world, the European sovereign debt crisis has heaped more pressure on the Middle East where political and social unrest have already taken their toll. Volumes of scrap sourced in September and October were almost 40% lower than they had been in the same period last year, and processors in the region are sitting on large stocks of unsold metal as they wait for better prices. Meanwhile, most buyers and sellers of non-ferrous scrap in India have reportedly declined ‘all forms of extravagance and risk’.

Dealers in Australasia have experienced a market slow-down in recent weeks but a slight increase in demand for scrap metals in traditional offshore markets. Prices paid for copper scrap in Brazil are above 92% of cash LME high grade owing to demand being stronger than supply. Copper flows have slowed in the USA due to the sudden drop in pricing while secondary aluminium values have not declined as much as expected owing to good demand. There seems to be a healthy supply of scrap lead-acid batteries but demand has been somewhat limited, leading to a big price drop of US$ 150-200 per tonne between September and October.

In other issues, consignments of material with a higher copper content have been delayed at ports in the Nanhai region of China since August because customs officials and importers have not reached agreement on duty and VAT calculations. Rules surrounding the loading of multiple items in the same container are being strictly enforced.

In South Africa, meanwhile, the issue of export duty on scrap metal is now to be decided by the Treasury Department; duties as high as 40% have been proposed and it would seem that a decision is imminent. In the same country, a ban is to be imposed on the possession of burnt copper wire, with the penalty likely to be imprisonment as opposed to a fine. The authorities hope this will mean a reduction in theft because insulated wire is traceable to its source whereas burnt wire is not.

With Russia likely to join the World Trade Organization (WTO) this year, export tariffs are likely to come under review here too. And in Mexico, the government has announced a two-year extension of the ‘Maquiladora’ tax scheme to December 2013. This gives tax exemptions for temporary imports of raw materials and goods for further processing in Mexico and subsequent export. ‘Maquiladoras’ are an important source of scrap metal and jobs.