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BIR Non-Ferrous World Mirror June 2012

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.

Events in the Euro-zone – notably the deepening crisis engulfing Greece – have once again dominated market developments in recent weeks. Metals values have generally headed lower while sentiment has been eroded. According to the market assessment from the Nordic Countries, ‘€˜a robust economic rebound’€™ in Germany has played a major role in propping up the Euro-zone’€™s overall financial performance.

Production plants in most of Western Europe are said to have up to 40% less scrap. Indeed, when based on fixed costs, low machine utilisation rates and lower margins, the larger scrap players are enduring difficult times. Meanwhile, aluminium works are complaining that scrap prices are too high given values of Euro 1650 per tonne for ingots. However, scarcity of material is limiting downside price pressure.

In France, the belief is that ‘€˜the market does not really know in which direction to go’€™. There is some demand for copper scrap at good price levels from southern Europe, mainly from brass rod makers, while several northern European consumers have also been buying at decent prices. Brass is not easy to sell whereas practically all qualities of aluminium are selling at reasonable discounts in Europe. Plenty more interest is coming from zinc users and discounts are much better than they have been, with the result that scrap dealers have begun to sell their stocks. Meanwhile, demand for battery lead continues to be strong.

A recent poll of VDM members in Germany revealed that 74% expected business conditions to remain broadly the same in the coming months, with only 3% anticipating an improvement and 23% fearing the situation would worsen. Some 57% saw no change in scrap supply from the previous year, with 16% reporting an improvement and 27% a decline.

Meanwhile, domestic metal consumption in Mexico is ‘€˜robust’€™ on the back of an automotive industry on course to produce an all-time-high 3m-plus vehicles in 2012. Demand for scrap aluminium is described as ‘€˜consistently very healthy’€™. Copper trading is more difficult with China ‘€˜still largely out of the picture’€™. In the USA, the automotive sector is experiencing its best year-to-date sales figures since early 2008 – aiming for annual vehicle sales of 14.3 million for 2012, up from a forecast of 13.6 million. The major American manufacturers are all adding shifts and increasing production.

In contrast, the automotive industry in Brazil is facing a very difficult period following a 13% drop in sales in April compared with March, prompting lay-offs and compulsory holidays. The copper scrap market has been hit by the decision of the largest buyer to suspend purchases for a month.

Amid weak demand and lower prices, secondary non-ferrous metals consumers have returned to the basic principles of supply and demand instead of taking a lead from the financial and hedge fund trading market, according to feedback from China. And although GDP growth of 6.7% is still in prospect for another of the major engines of the world economy, India, optimism has been undermined by a free-falling Indian rupee and a drop in industrial production, among other issues. The rupee’€™s weakness helps exporters, but India is a net importer and the Western markers are struggling, with the result that the negatives are outweighing the positives. In India, domestic trade is experiencing a sluggish period for industry offtake.

Scrap processors in the Middle East are not offering scrap given current LME levels, opting instead to build up stocks and await better prices. Collection volumes in the region have dropped ‘€˜dramatically’€™ owing to unattractive purchasing prices.

A number of issues have remained in the spotlight over recent weeks. In Indonesia, for example, scrap importers have reported delays of up to 14 days to clear containers of non-ferrous scrap due to customs’€™ strict inspections, resulting in additional demurrage costs. Meanwhile, it has become increasingly difficult to book container space on vessels sailing to Indonesian ports because shipping lines are concerned about containers of scrap metal being tied up by customs authorities.

In South Africa, meanwhile, new legislation – the Second Hand Goods Act regarding the possession of copper scrap with insulation removed – came into effect on May 1. Henceforth, anyone who is in possession of such material must take reasonable steps to ensure that it is not of questionable provenance. For transgressions, the penalty of 10 years’€™ imprisonment could extend across the business – from directors to yard managers and scale operators.

Many South African dealers and merchants have been proactive in approaching their local law enforcement offices; they have been offering education and training with regard to recognising the different types of copper scrap and demonstrating the steps they take to record where the material comes from and the various declarations that they require their buyers and sellers to make. At the time of writing, the law has not been tested and at least one major merchant is not buying copper for the time being until some precedent has been set or he sees some clarity in the processes. Although this particular law is specific to copper, there is a concern that it will be extended to other metals.

New legislation was also introduced recently in Italy and this stopped exports of scrap considered to be waste – but the law was quickly rescinded. In Russia, it is anticipated that recent political changes will mean the process of progressively cutting scrap export duties could begin from August. At present, prices are steady domestically but are much lower than in other markets.

And in New Zealand, an increase has been noted in ‘€˜very small-scale operations’€™ starting up – a development attributed to newspaper reports on metal theft, high prices and commodity booms. Meanwhile, metal markets in both New Zealand and Australia remain slow and volumes are noticeably lower.

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