Nonferrous metals are pausing following significant upward price movement over the past several months. Fundamentals haven’t truly changed, but macroeconomic issues and geo-political policies appear to be driving markets.
Stainless steel, for example, has swung sharply in price in response to decisions made by the governments of Indonesia and the Philippines.
In mid-January, the Indonesian government said it would ease its ban on exporting nickel-containing ores under certain contingencies. The announcement drove down nickel prices as a flood of surplus nickel from Indonesia was expected.
This announcement was followed by one from the Philippines that tightening environmental policies could lead to the closure of a number of nickel mines in that country. A recent report by the investment company INTL FCStone, headquartered in New York City, says the Philippines’ Department of Environment and Natural Resources has ordered 23 mines, many of them producing nickel, closed while the government examines their environmental audits. The associated uncertainty has strengthened to nickel prices.
China also may reduce its stainless steel production in 2017. After a robust 2016, Chinese stainless steel producers may be hit with more anti-dumping judgments (the U.S. filed anti-dumping charges against China last year). If the charges stick, exports of finished stainless steel from China could slow, resulting in reduced production within China and less demand for nickel scrap and primary nickel.
Aluminum scrap has seen a moderately healthy market through the end of 2016 and into the first month of 2017. One large dealer says business is good. “The volume of material is steady and our yards are full. Prices are fairly healthy,” the dealer says.
“In fact, markets for both aluminum and copper are pretty positive,” he continues. “Not just fair but good.”
The U.S. scrap market could be challenged by steadily declining demand from Chinese aluminum scrap consumers. This trend is driven by an increase in China’s domestic recovery network.
According to Mike Southwood with the metals research group CRU, Pittsburgh, China’s recovery of aluminum scrap has doubled between 2008 and 2015, reducing the country’s need to import that material. Imported aluminum scrap has been trading at a premium to domestic scrap, which also has discouraged imports, Southwood adds.
Domestically, an East Coast scrap dealer says demand for aluminum scrap is picking up.
The U.S. Geological Survey (USGS) reports that while total recovery of aluminum scrap in the U.S. over the first 11 months of last year increased by 6.9 percent relative to the same period in 2015, export of this material during that period declined by 14.1 percent to 2.74 billion pounds.
Domestically, an East Coast scrap dealer says demand for aluminum scrap is picking up. He says that while it is becoming more challenging to find ready markets for some lower grades of scrap, higher grades move more quickly.
Copper markets continue to show strength, partly in light of labor problems at some of the largest copper mines in the world.
Prospects for supply disruptions at BHP Billiton Ltd.’s Escondida mine in Chile, the largest copper mine in the world, appear likely.