Nonferrous scrap metals continue to feel the effects of uncertainty.

John Gross of JE Gross & Co. Inc., Huntington, New York, writes in “The Copper Journal Weekly Report” email dated Oct. 7, “When companies here, and around the world, don’t know what policies are going to be for trade, the economy, taxes, tariffs, interest rates or politics, they do nothing until clarity returns.” This appears to be the situation currently, with trade tensions continuing between the U.S. and China, ongoing uncertainty around Brexit and contracting global manufacturing indices.

While the Institute for Supply Management Purchasing Managers Index for August fell to 49.1, below the critical 50 level indicating contraction, the September figure was even lower at 47.8—the lowest it’s been since June 2009.

The eurozone also saw manufacturing contract in September, hitting an 83-month low of 45.7, IHS Markit says.

“No one needs the metal right now. Sheet mills are long on material and short on sales.” – a scrap processor with operations in the Midwest and Southeast

According to the International Monetary Fund (IMF), the U.S.-China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis. By 2020, announced tariffs would trim global growth by 0.8 percent, the IMF says.

More bad news came in the form of the strike by General Motors employees who are part of the United Auto Workers union. As of mid-October, they were in week five of their strike, which cost GM $2 billion as of week four, according to Bank of America estimates.

The good news is that the strike appears to have been resolved as of Oct. 16, though the union must still vote to ratify the contract.

The aluminum sector had begun to feel the effects of the strike in October.

A contact with a scrap processing company that has locations in the Midwest and Southeast says the strike is “definitely having an effect on the market” for aluminum.

“[Scrap] consumers have a tremendous amount of output tied up in GM,” he says.

The strike is affecting secondary aluminum alloy producers and primary producers by reducing demand for their products, he says. It also is affecting scrap generation as “a tremendous amount of industrial accounts ... are at a standstill in Michigan and throughout the Midwest,” the contact says.

However, he says he does not believe the reduction in generation will have a noticeable effect on the oversupply of aluminum scrap that has been plaguing the domestic market this year. “There’s just so much of it out there,” the source says. “No one needs the metal right now. Sheet mills are long on material and short on sales.”

The outlook is not any brighter for copper scrap, he says. While generation has been relatively stable, the source says domestic demand has slowed in the last two to three months and export demand is “spotty.”

Nonferrous scrap consumers also are getting pickier, the source says. “It has gotten progressively worse as the market becomes more oversupplied.”

He says honey, semired brass and No. 2 copper have been difficult to move because not many homes exist for these materials, particularly in the volumes that had been going to China.

The source says he believes it will be a while—perhaps the second or third quarter of 2020—before the domestic oversupply of aluminum and copper scrap is absorbed. “I hope it gets better, but it’s going to be a challenging market for a while,” he adds.