Recyclable commodities markets have been well-acquainted with disruption in recent years. Since China introduced its National Sword policy in 2018, the disruptions have continued in the form of trade wars and tariffs and now the new coronavirus, COVID-19. No one knows how long the outbreak will last. And that is not the only virus-related question that has arisen.
As Recycling Today Senior Editor Brian Taylor reported Jan. 31 on RecyclingToday.com, citing nonferrous sector information emanating from China, copper and aluminum traders appear to have concluded that reduced consumption of those two metals in China will outweigh any effects on pricing from reduced production in that country. Ferrous scrap traders also are trying to determine what the effect will be on that sector.
Metal-consuming furnaces are not necessarily easily idled, so production likely will continue despite reduced construction and manufacturing activity given the extension of holiday-related shutdowns and the quarantine of Wuhan, the city in Hubei province where the virus originated, as Chinese government officials attempt to control the spread of COVID-19. The province’s major industries include automotive, equipment manufacturing, petrochemical and iron and steel.
“Recyclable commodities markets have been well-acquainted with disruption in recent years.”
Taylor points to a survey that metals industry information provider Shanghai Metals Market (SMM) conducted of its readers in late January “to assess the impact of the holiday extension on the whole steel industry.” SMM concluded that electric arc furnace steelmakers, which represent less than 10 percent of the country’s steelmaking capacity, and rerollers “are likely to take a hit from the coronavirus outbreak.”
He also cites a Jan. 29 Wall Street Journal article that states, “China’s northern steelmaking heartland” has had fewer coronavirus cases, meaning steel output in the nation could stay largely on track, adding that this could exacerbate the supply glut situation.
China’s National Development and Reform Commission says that as of Feb. 24, 86.3 percent of nonferrous metals companies have resumed production, according to SMM.
“The key issue now is how quickly the producer-held inventory can be moved to end users as they resume activity through March,” SMM writes as of Feb. 21. “Should the activity remain slow and inventory rise to levels which hurt [cash flows] and cause producers to cut output, then this could be harmful to prices. However, should the inventory move smoothly and enable producers to avoid cash flow and production issues, then the overall impact to prices should be limited and encourage more upside based on the underlying view that demand for the year will be strong across the board.”
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