As 2016 moved into the second half of the calendar, the global metals industry and the global scrap industry continued to exhibit the same symptoms that have made the sectors uneasy throughout the middle part of this decade.
Metals producers in China, including stainless steelmakers and secondary aluminium producers, continue to churn out product as if that nation’s economy is growing by double-digit percentages.
Economic data from China, however, as well as export data for finished metals produced in China, continue to demonstrate that the economic growth rate in China is not living up to the high standards set earlier this century.
Based in part on these concerns, investors in metals markets seem to be showing little interest in bidding up the price of copper or aluminium, with both metals trading in a narrow range, down significantly from the heights reached in China’s biggest boom years.
Forecasters at one of the investment community’s biggest players, United States-based Goldman Sachs Group Inc., released a report predicting copper is heading from its early August 2016 value of about $4,800 per tonne ($2.18 per pound) toward the $4,000 per tonne range, or $1.81 per pound. That would signify a 17% drop in value for the red metal.
An online article prepared by Bloomberg says analysts from Goldman Sachs emailed a report predicting the slump will occur from mid-2016 to mid-2017 “as [copper] mine supply picks up, producers enjoy lower costs and demand growth softens.”
The analysts say there has been “solid growth in global mine supply” in the first half of 2016, which seems destined to bring additional supply in a market Goldman Sachs characterises as experiencing “softening” demand growth.
The Bloomberg report and the Goldman Sachs analysts say additional mine supply is expected from Indonesia, Chile, Zambia and possibly Peru.
The scrap industry has cited copper prices that have slid from peaks earlier this decade in the $4-per-pound range as a reason for lower copper and brass scrap supplies.
Contributors to a late July 2016 nonferrous edition of the Bureau of International Recycling (BIR) World Mirror say scrap flows remain muted, especially during summer months that are seasonally slow in many parts of the world.
“Activity levels have been shrinking in the summer period,” writes Murat Bayram, who works from Germany for United Kingdom-based European Metal Recycling Ltd., in the Mirror. “Availability of high-quality scrap—particularly aluminium and copper—has been falling, and the industry is expecting shortages to emerge soon in certain qualities.”
Ibrahim Aboura of Jordan-based Aboura Metals FZCO writes, “In the Middle East, there was the expected slowdown owing to Ramadan followed by the summer season.”