China using more using primary and refined grades instead of scrap

Global – At the 2015 Annual Convention of the China Nonferrous Metals Industry Association Recycling Metals Branch (CMRA) held in early November, it emerged that an increasing number of China’€™s non-ferrous alloy consumers are using primary grades, refined grades and copper cathode in place of their traditional scrap input. ‘Certainly, that is a threat to our industry,’ acknowledges BIR non-ferrous metals division president David Chiao in the latest Non-Ferrous Metals World Mirror.

According to China Customs statistics for the first nine months of this year, meanwhile, the country’s refined copper imports suffered a 4% year-on-year decline to 2.55 million tonnes owing to weak demand. The non-ferrous recycling sector is coming under profitability pressure in many parts of the world, according to a number of the Mirror reports.

In the USA, for example, ‘every week’ brings fresh news of  ‘headcount reductions in the form of lay-offs’ while ‘margins are slim at best’. And in Germany, some market participants are reporting a 30-40% drop-off in scrap supplies that would have come traditionally from small merchants, while many others are talking about ‘walking deaths’ – in other words, companies which are believed or known to be in great financial trouble but which somehow continue to operate.

To mitigate risks, an increasing number of consumers in India have been moving to formula contracts and have been pricing materials closer to the time of consumption or sales. Some consumers in Mexico have turned their back on scrap grades that they were ‘pursuing aggressively just three months ago’, with Tense and Taint Tabor having recently suffered a sharp drop in demand.

In Japan, aluminium scrap prices dropped by as much as US$ 70 per ton in November owing to lower LME values and sufficient availability for secondary smelters. Scrap availability is not so good in Russia with the onset of winter conditions while prices have weakened at the same time.

Elsewhere around the world, the Middle East has also suffered the effects of weaker demand for metals and reduced commodity prices. Adding in low oil prices and geopolitical instability, all these factors are said to have placed ‘huge’ pressure on transactions and margins in the region.

In Australasia, the weeks prior to the summer shutdowns around Christmas are normally very busy but most metal merchants are reporting much quieter market conditions than usual and are not anticipating any real improvement in the short term. ‘Domestic consumers are still buying at current levels and scrap availability is good at home,’ it is added. ‘Traditional offshore markets are still buying, albeit with challenging terms.’

Christmas appears to be coming early in South Africa as many metals-related businesses are choosing to commence their annual shuts either in the first full week of December or at the latest by December 11. ‘There is sufficient raw material but the sudden drop on the LME has caught out many dealers with expensive scrap that they do not wish to sell at the present levels as they would lose too much money,’ it is pointed out.

A similar sentiment is expressed about the scrap market in France. ‘The end of the year in 2015 seems to have arrived very early,’ it is stated. ‘Business has largely stopped, there is not much demand, and prices are so low that most scrap dealers prefer to stock and await a better market.’

Against the backdrop of sliding metals prices, feedback from Italy suggests strategic planning has been overtaken by a focus on day-by-day operations and concerns, as well as on solid customers and quick payments.

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