No bright copper forecast for 2002. (Nonferrous).

While copper melting facilities often like their feed-stock bright, the shiny metal may provide the only brightness in the market for the foreseeable future.

The economy's impact on the copper markets is not expected to diminish in 2002, according to presenters at the ISRI Commodities Roundtable, held last week in Rosemont, Ill.

Mark McGrainor of Refco Inc., Hudson, Ohio, says his bearishness on copper can be tied primarily to the sickly demand side of the equation. In 2001, global consumption of copper is likely to be down 2%, with the U.S. spearheading the downward momentum with a staggering 8% drop in consumption.

The considerable surplus of material that has built up in 2001 will grow even larger in 2002, McGrainor forecasts. Using a forecasting model based on existing and expected supply and demand, McGrainor believes the average price of copper on trading floors will fall to 65.25 cents as an annual average in 2002--down from an average above 70 cents for this year. "Sad to say, if producers don't cut back, I'm not sure we can hold in the 60s" for parts of the year, McGrainor told Copper Roundtable attendees.

If any of those production cuts occur in the U.S., McGrainor told attendees it is not unreasonable to wonder whether those would be permanent facility closures.

Tom Morton, a vice president with the Wolverine Tube facility in Huntsville, Ala., says his company has seen its business down "some 20% to 30% across the board" in 2001 versus 2000. The company's diverse operations will allow it to survive the downturn, he added, and Wolverine will remain "a consistent buyer of scrap."

Gerd Hoffman of Germany's Huttenwerke Kayser AG urged attendees not to think of East Asia as the "natural home for nonferrous scrap," while stating that the U.S. and western European secondary nonferrous industry will have to "think differently and operate differently than it has in the past."

Hoffman pointed to statistics that show nonferrous consumers in Europe and North America melting more primary cathode versus scrap. He pointed to purchasing competition from Asia and the reduction of scrap coming from Eastern Europe as two reasons for the switch, as well as regulatory restraints that have worked against the melting of copper scrap.

Average U.S. Refiners Buying Prices for No. 2 Copper Scrap

September 2000   70.23
October          67.57
November         64.03
December         66.85

January 2001     64.81
February         66.00
March            63.82
April            61.36
May              61.93
June             57.95
July             57.50
August           55.50
September        55.00

Source: American Metal Market

Note: Table made from bar graph.