Long-term strength.

Market watchers believe nonferrous metals will hold onto much of their value during the first few months of this year.

While the late 2004 run-up in copper provided an opportunity for some retrenching to take place, stocks at the London Metal Exchange have declined. This should work to keep pricing high in a strong demand market.

China continues to play a key role in the copper market, while the improving U.S. economy also continues to benefit copper scrap pricing.

The Chinese New Year has been identified as having softened demand for copper in the first quarter, but this is expected to be a short-term situation.

Regardless, copper scrap prices continue to bump up against the higher levels of the price charts, and demand is expected to remain strong through most of this year.

A number of traders and processors expect to see 2005 to be a continuation of the strong 2004 nonferrous market, with some metals in even tighter supply. Nickel and stainless scrap in the United States and China should be very tight, with Europe showing some firmness in markets overall.

While new mined nickel capacity is expected to ease the tight supply for nickel, most of the new capacity is not expected to come online for another year or two, which should keep nickel scrap in strong demand. Domestic production should remain strong through this year, several traders note. "The U.S. dollar has a big impact on the nickel market," one New York City-based trader says.

Melting production also has firmed, resulting in a tighter supply of material.

Concerning global supply, the London Metal Exchange has shown reduced stocks for many nonferrous metals.

Some commodity houses also see aluminum and zinc continuing to strengthen through the first part of this year. A weaker U.S. dollar will likely help exporters of these two grades. China continues to play a key role, and India has become a more active participant in these markets.

A pickup in overseas demand will likely result in higher prices on the domestic market for aluminum. According to a recent forecast by Citigroup, aluminum and zinc prices could climb faster than other metals as demand could outstrip supply.

Along with limited supply availability, continued power shortages in China could curtail the new supply of alumina.

Adding to the overall expectation of stronger aluminum prices, the Citigroup report says that only around 1 million metric tons of mine capacity is slated to open within the next two years. The minimal addition will not ease aluminum inventories.

While demand for the material remains strong, shortages of aluminum scrap are not being reported, so prices are not escalating rapidly.

Meanwhile, the construction segment in the U.S. remains strong, which translates into strong demand for many nonferrous metals.

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

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