Source: International Copper Study Group

* In thousands of tonnes. Source: International Copper Study Group

Recyclers and traders of nonferrous metals are caught in a crossfire of excessive production of finished metals on the one hand (suppressing prices) and on the other hand a lack of scrap compared with the headier years earlier this decade and the prior decade.

The difficulty of coping in such a market was a topic of discussion at division and committee meetings at the 2016 Bureau of International Recycling (BIR) World Recycling Convention, held in late May and early June in Berlin.

Non-ferrous Division President David Chiao of the United States-based Uni-All Group called the current conditions a “difficult” period for recyclers. Guest speaker Murat Bayram of United Kingdom-based European Metal Recycling (EMR) said diminished scrap flows have led to an inability to feed all the world’s scrap yards, meaning further consolidation was likely.

He said this while also noting that the sector already has experienced business closures and insolvencies. As well, payment delays throughout the metals and manufacturing supply chain point to distress, Bayram said.

In terms of responding to the conditions, he said nonferrous metals recyclers can focus on their strengths of sorting, processing and logistics rather than on trying to second-guess price movements in an uncertain market.

Bayram said the spring 2016 spike in ferrous scrap prices helped trigger a much-needed upturn in collections of ferrous and nonferrous scrap metals. Even so, he said, scrap availability remained “very tight” for many grades and metals, including copper.

Provided scrap can be rounded up, Bayram said there are “full” order books at many secondary metals production facilities.

He also said the easing of international commercial sanctions on Iran could lead to “huge opportunities” for metals companies and equipment suppliers.

Although no other market on its own could match the scale of a slowing China, encouragement could be taken from gradual growth in the “very important” Indian market and from the reasonably positive economic signs coming out of Europe, Bayram said.

Fellow guest speaker Eugen Weinberg, head of commodity research at Germany-based Commerzbank AG, said China would remain a hugely significant factor in the market but was currently a focus for “unreliable” growth data and “huge overcapacity.”

Weinberg remarked that the best-performing metal on the London Metal Exchange (LME) this year had been zinc, with a price increase of around 25%. He cited zinc’s ability to counter the trend in falling prices as an example of what could be achieved through a strong supply reduction.

At the BIR event, during a panel discussion moderated by Peter Dahmen of Germany-based Metallgesellschaft Schoof & Haslacher, Weinberg suggested that the rest of the world would need to protect itself until such time as subsidized metals production in China is curtailed.

Fellow panelist Robert Fig, the head of physical market sales at the LME, remarked that China was “incredibly important” for the metals industry, stating, “I don’t think that’s going to change dramatically.”

Provided scrap can be rounded up, order books are “full” at many secondary metals production facilities, says Murat Bayram of U.K.-based European Metal Recycling.

Fig also said the imposition of import duties was generally an unsatisfactory approach as it often led to retaliation and could encourage unprofitable production in other countries.

He spelled out what he called the central role of the LME in helping companies to manage the risks associated with uncertainty and volatility in the prices of metals. He emphasized that hedging “is not a profit center in a company” but rather a tool to avoid risk.

The lack of available scrap and excess production (again with China being singled out) also served as a leading topic of conversation at the BIR’s Stainless Steel & Special Alloys Committee meeting during the conference.

In a panel discussion during the meeting, Barry Hunter of United States-based Hunter Alloys LLC said he had “never seen it like this” regarding the “universal lack of [alloyed] scrap” in his 50 years in the business. (See the cover story “More Questions than Answers” starting on page 16 of this issue for more on the stainless market.)

In the second quarter of 2016, COMEX and LME copper pricing moved within a range that sometimes brought it down toward the $2 per pound level. The value of copper for three-months-out delivery declined by 1% on the LME 18 May, dropping to $2.09 per pound. Earlier in the trading session, the red metal hit $2.07 per pound, which Bloomberg called its lowest valuation since 19 February 2016.

The downward trend continued in Chicago-based COMEX trading the same day, with the closing COMEX price 18 May hitting $2.07 per pound.