Nonferrous markets see short-term gain.

As 2006 comes closer to a conclusion, it appears that many nonferrous metals will end the year on a fairly upbeat note. Aluminum and copper, which both saw declining prices in early fall, have made gains.

While this positive indicator has allowed the material to move steadily, a growing number of scrap metal traders say they expect to see a correction by 2007. While market analysts may be mixed on the degree of the correction, prices, especially for copper, have shown remarkable increases during the past year.

This mood is not just limited to U.S. handlers of the grade. Several European scrap dealers also note that orders for copper and aluminum had softened a bit at the end of the summer and in the early fall, as Chinese buyers opted to sit out the market.

At the same time, supplies of copper had perked up throughout Europe, which has helped to soften prices.

More recently, however, signs have indicated that prices for aluminum and copper have turned around. China could be getting ready to re-enter the market, with indications that consumers are looking for some lower grades of copper scrap as a substitute for more expensive grades. There still seems to be some feeling that in the short term following the recent slide in copper prices there could be a modest return in strength for red metals.

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One large West Coast nonferrous exporter sees a fairly good upside for copper prices for the rest of this year. However, there is a sense, according to some scrap dealers, that markets could show some significant declines next year.

The U.S. dollar, oil prices and, on the domestic side, housing and auto production also need to be watched when determining the forecast for some nonferrous metals.

While many traders are bearish on copper markets heading into next year, a recent report from Reuters quotes Codelco, the world's biggest copper miner, as saying the global market for the metal will remain in balance through next year, keeping prices at a "high" level.

"We see low inventories and strong demand," Executive President Jose Pablo Arellano tells Reuters. "That provides the basis for strong prices."

Aluminum markets are expected to slow down as the year comes to an end. The combination of a slowing auto market and a cooling housing market could be twin hammers that make it more difficult to find a steady flow of aluminum scrap during the next several months.

One aluminum dealer says that while demand is "decent," it has become more challenging to move material, as some consumers on the domestic side opt to hold off making any larger purchases.

The softening of the housing market also is playing into a general slowing of the aluminum market, although there doesn't appear to be any signs of a major price correction.

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