Hedging your bets.

Nonferrous markets continue to be extremely volatile, especially copper. With prices for copper scrap topping record levels, many handlers of the commodity express a mixture of amazement, befuddlement and concern about the short-and long-term movement of red metals.

With prices being so high, many processors are looking to turn the material, leaving very little in the way of excess inventory on hand. "Warehouses are empty, and we are trying to keep as even a book as possible," a scrap dealer on the East Coast notes.

While domestic and offshore buyers continue to purchase sizable loads of the material, reports from a number of regions of the country indicate that plenty of supply is coming in, including steady to strong volumes via retail trades.

The surge in the secondary copper market is being abetted by what many scrap dealers report is the growing stake that hedge funds are playing in the market. This area is generating greater concern for many in the industry.

As scrap prices have surged based on the $3.50 per pound Comex level, price swings are becoming dramatic.

"It is tough to quote prices," one Midwest scrap dealer says. "You could lose all your margins."

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While price swings of 20 cents or more are not necessarily uncommon now, one scrap dealer points out that as a percentage of the price, the swings are not much greater than the typical price change of several years ago, when prices for copper scrap were less than half of what they are right now.

Somewhat surprising is that despite copper prices that have been up sharply throughout the last 12 months, many suppliers say they still have not seen a slowdown in the flow of material coming through their doors.

Several large handlers of copper scrap say that with higher prices, more domestic consumers are opting to wait-out orders, anticipating a retreat in prices. This is creating concern on the part of processors, who may be sitting on large blocks of very expensive material. "There are some cash flow challenges for us," an East Coast scrap processor notes. Despite some downward pressure, another broker who handles a large amount of copper scrap says that some domestic consumers are looking for alternative materials to use as raw material feedstock.

The higher prices have helped to widen margins, giving some consumers a bit more flexibility.

While erratic price movements continue, several processors say they feel that the summer months could be a time of modest cooling in the market. Although very few people are expecting a sharp correction in the copper scrap markets, the seasonal slowdown could give some processors the chance to get their books back in order and allow the market to gain stability.

Aluminum scrap may not be showing the strong price swings that copper is demonstrating, but handlers of this material also are reporting a strong upward market from domestic and offshore buyers.

A West Coast broker says Asian markets are still hungry for aluminum and domestic mills also are buying. "1 would love to take a position, but the markets are too volatile."

Adding to the overall uncertainty, the broker notes that in early May "everyone was throwing up their hands trying to understand the market."

(Additional news about nonferrous scrap, including breaking news and consuming industry reports, is available online at www.RecyclingToday.com.)