Sub-prime issues affect nonferrous markets.

After seeing a strong upward climb for many nonferrous metals, the continued problems with the U.S. housing industry and the sub-prime mortgage business are having a sharply damaging affect on some key nonferrous metals, notably copper.

Copper, which has been quite buoyant throughout the past several years, has seen some stiffening resistance, as more consumers are finding slack orders for their products. Additionally, because a significant amount of copper goes into the new housing sector, a decline in new housing starts is felt throughout the system.

Copper markets could continue to be a challenge, as there is a growing sense that China, which was very aggressively purchasing the material during the first half of this year, may reduce its intake during the second half, having filled its inventory needs.

Adding to those concerns, some reports have indicated that slowing demand for copper from Chinese consumers is resulting in the country selling off some of its inventory, helping to boost overall inventory levels, notably on the London Metal Exchange (LME).

Slowing demand is not preventing Chinese companies from expanding their market reach. China's largest alumina and aluminum producer Chinalco, parent of Aluminum Corp. of China Ltd. (Chalco), plans to acquire a 49 percent stake in Yunnan Copper Group for an undisclosed amount, according to news reports. Chinalco will become the copper producer's largest shareholder and will take advantage of Yunnan Copper's technology and experience to explore overseas copper resources.

While the copper market has been softening through the first half of the summer, labor issues have resulted in reduced supplies. A strike at two mines, including a copper mine, owned by Grupo Mexico SAB have helped to cut the supply of copper available on the market.

Copper may have slid through the first half of the summer, but it isn't the only nonferrous metal that has slipped. Nickel markets, which have soared throughout the past year, have seen prices sharply retrench. One report notes that nickel, which has fallen to nearly the $25,800-per-ton level, is selling for approximately half the price it sold for earlier this year.

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Several reports note that inventory levels for many of the top nonferrous metals have seen appreciable increases on the LME during the first half of August. Even with some labor issues and work stoppages in light of external causes, supplies appear to be increasing on the open market.

The same problems seen in other nonferrous segments have caused the decline in nickel prices. However, when prices for the commodity climbed, some consumers sought substitute materials. This phenomenon currently has resulted in excess material on the market.

Aluminum also has softened recently. While not enjoying the sharp increase in price seen by nickel, copper and lead, aluminum markets held up throughout the past year. However, many of the same macro factors that have hammered other nonferrous metals also have hurt aluminum markets.

While the overall tone for nonferrous markets is somewhat pessimistic now, there may be cause for hope. While there have been some sharp declines in price and demand throughout the past several months, there is a feeling that toward early fall, the market may stabilize, which could result in more balanced pricing going into 2008.

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