Warm glow: red metals reach equilibrium while the ferrous spike attracts attention.
Copper, likewise, seems to have found a bit of stability in an otherwise interesting metals market. However, the price of steel might have more impact on copper prices, short term, than either tube or wire prices.
"Copper is doing okay," says Sam Jacobs, president and owner of Columbus Metal industries, Columbus, Neb. "Flow is not as busy as before (in spring and early summer). Today, it's not extremely busy and not extremely slow."
He says he has seen something of a slowdown since the Chinese pulled back from their springtime buying binges. But, even more, it appears that the individuals who provide scale traffic are being a bit more speculative. He notes that the plumbers and electricians generally move small amounts promptly. But on larger projects, it seems alley are more prone to sit and wall ... perhaps hoping for another price peak.
NARROWING RANGE. Looking back through June, Rik Kohn, vice president of sales at ingot maker Federal Metal Co., Bedford, Ohio, says scrap availability has slowed. Like other observers, he thinks the huge surge of copper scrap movement in the spring sucked down any buildup that was out in the hinterlands. "The stockpile needs time to replenish," he says. The result is a copper market that is trading in a tight band.
"There is not a huge price tango," agrees Steven Gilbert, Global Recycling Inc., Miller Place, N.Y. While they broke through the $1.30 mark in early August, Comex copper prices are hovering around $1.25. Much of the material
Gilbert moves has a higher percentage of steel than of copper. In his operation, the price of steel is a major factor in his ability to move material.
"Copper has found a bit of stability," says Gilbert. "Today, there is demand. There is more demand than supply," he notes. Global Recycling ships material from locations in Charlotte, N.C., and Little Rock, Ark.
Much of the supply now coming into scrap yards is being brought along with ferrous scrap that is making its way to scale houses that are now paying more for that commodity.
"Steel is bringing material out from everywhere," says Howard Lincoln of Lincoln Metal Processing. Both his Erie and Meadville, Pa., locations are busy. "Price talks. I've never seen so much scrap. We're cleaning up the countryside."
Lincoln says he thinks this market makes it a good time to invest in new equipment. "It's coming in faster than I can ship it. Our industry can take this opportunity to make up for some of the bad years," he says. With an eye on the future, he has purchased a couple of new trucks, a new baler and a shear/baler.
While the red metals are moving, it is steal that is driving the marketplace.
"Lower grades (of copper) are not affecting the price as much as people trying to read steel," Gilbert says. He says that the short-term North American shortage in steel has created an interesting market for metals.
"There are too many unknowns in the market. It depends on the supply chain," he says. "If steel supply continues thin, prices will go up."
"Prices are off their highest, but are holding strong," says Adam Ruben of Globe Metal Inc. in Sainte Catherine, Quebec, Canada.
GlobeMetal specializes in solids and deals almost exclusively in industrial scrap. "Material is flowing," Ruben remarks.
With steel grabbing the headlines, Kohn says he thinks copper will continue to work in the shadow of the steel market. "It's my sense that, with such a hot steel market, people are spending their energy getting their ferrous materials processed," he comments. "Nonferrous takes a back seat. Some material is being kept off the market just because it is not a high priority right now."
Certainly, the red metals that make it into scrap yards can find a home at domestic or overseas destinations. "I have nor had any problem moving copper scrap," notes Ed Osley, founder and co-owner of Vikoz Enterprises, Salt Lake City, Utah.
EXPORT DEMAND. The export market is the wild card. When demand from Asia heats up, domestic purchasers have to scramble to keep furnaces supplied, and prices move up. When a big consumer sits on the sidelines, as China did this summer, prices fall.
Still, prices for copper have remained decent and the flow of material continues to be strong. Comex prices continue to float around the $1.20 to $1.30 range ... quite satisfactory to most sellers in the market.
Number One Bright Wire hovered just above $1, and No. One Wire was between 90 cents and $1. Bus bar and tube, likewise, were moving just above 90 cents. On the cable side, No. One insulated material was going for about 60 cents and Romex in the high 30s to 40 cents.
Kohn says he thinks European consumers are trying to buy copper units in anticipation of the Chinese coming back into the market and, again, driving the price up.
Vikoz moves its bar locally without any problem. "I don't rely on the Chinese," Osley says. While he notes that the export market recently put a damper on prices, he adds, "It does not affect me, I'm so mill direct."
As a secondary benefit, he did not get burnt when the Chinese pulled out of the market.
When the next Chinese buying push comes, Kohn says he expects they will pay top-of-market prices, but will not be as likely to overpay the market or even to jump ahead of the market as they did earlier this year. In the spring, it was not uncommon to see Chinese buyers offer a nickel or so above the asking price to get the material they required. Those leaps created a ragged market.
"Scrap in the spring was way overvalued," Kohn says. Now it is back to more traditional values. Price is settling down and, while supplies are tighter, he says he thinks enough scrap is out there to meet industry's needs.
PRICE OUTLOOK. The presence or absence of the Chinese in the market has not made a huge difference in the short term for some dealers in the red metals market, especially for those in the eastern half of North America. Ruben says the Chinese marker has not had much affect on his company's business in Eastern Canada at all.
Gilbert and Global Recycling, however, are much more active in the China market. "International pricing cannot be competitive against such a strong domestic market," he maintains.
Gilbert says major grades are in short supply. The movement of inbound material into the recycling yards is slow, although off-grade material is moving. He says he thinks that some sellers are holding the better material while moving the lower quality. "Some like to sell the off-grades to generate cash flow," he notes.
While Nebraska-area prices were drifting in the $1.05 to 1.10 range, Jacobs says it is possible that copper could revisit $1.25 locally before the end of the year.
"Nothing would shock me," he says. "I think we could see $1.25 again for a short time. I never get impatient any more. There is enough stability in the market that, even if it drops 6 [cents] or 7 cents, the price will come back."
"The price of copper will depend on the U.S. economy and how much business [capital spending there will be] to keep it going," Kohn says. "If the economy is good and firm, prices will pick up, and we will have plenty of business. If the dollar gets strong, the Comex gets weak; if the dollar gets weak, the Comex gets strong. At the end of the day, it all comes down to supply and demand."
Kohn says he expects the market to hang around $1.25. "I think $1.25 will be the middle point, with 10-cent moves on either side. $1.35 wouldn't surprise me, nor would mid-teens. $1.25 is a midpoint." He adds, "I don't see it going over $1.40 or under $1.10.
"It's a fuzzy picture," he continues.
"The biggest factor for the rest of the year is what the business climate will be like. Are people spending money?" Kohn asks. He notes that the question needs to be applied both to the consumer market and the business segment. "Will businesses replace parts and equipment?" he asks.
Osley also is comfortable with copper in the $1.25 to $1.30 area. "Copper could inch up a nickel or so ... no more," he says.
Lincoln is optimistic about the outlook. "The dollar is low, goods are cheap, inflation is down. This market could go on for another three to six months," he says.
"I'm looking at high prices. If prices go down some, it won't make much difference," he continues. "I don't think the market will collapse. Things are too busy. And the industrial sector is just starting to pick up.
"I think this market will continue for a good, long time," Lincoln adds.
Like Gilbert, Jacobs is watching the flow of other metals. Everyone has seen what happened in the copper market when steel prices bounced. Jacobs says he is a bit surprised that aluminum did not take off when steel spurted up. And, with everyone continuing to watch what happens in the steel sector, a key question remains: Will people devote a lot of extra time in shipments of copper, aluminum and the less pricey materials rather than watch the red-hot ferrous market?
Osley has seen aluminum start to move back up in the Salt Lake area. Prices going into August were in the low-to-mid 70s, with secondary smelter grades moving into the mid-60s. Osley says he expects aluminum to hit 80 cents by the fourth quarter of 2004.
It could be that some of the other mainstream metals will wander back into copper's playground and give a price push in one direction or the other. The consensus, however, seems to be that if everyone plays nicely, the marker for red metals will continue to rock back and forth in a fairly narrow path for the rest of 2004.
The author is a Recycling Today contributing editor based in Cleveland He can be contacted at firstname.lastname@example.org.
FLUSHING OUT RADIATORS
Car radiators, a traditional scrap grade in the red metals market, have drifted recently between 40 and 45 cents. Red brass has moved around 55 cents, and yellow brass has been a dime to 15 cents less.
"Brass just went up on auto radiators," says Sam Jacobs of Columbus Metal Industries, Columbus, Neb. For a while, the Chicago price for radiators was down around a half-dollar, "It wasn't the market price ... they were just inundated with radiators," Jacobs says.
In Nebraska, Jacobs is paying about 46 cents at the door. Bulk dealers get a few cents more. He says he expects auto reds to be trading in the 70-cent to 80-cent range. The door trade will come in at the bottom of that limit.
In Erie, Pa., a radiator peddler can expect about 40 cents at the door from Lincoln Metal Processing. Howard Lincoln says he is more concerned about getting materials off of his lot and over to the mill than he is getting scrap into the yard. "Our big problem is getting trucks to go to the mill," he says.
"It's a pretty busy market," he continues. "Our mills are melting 24/7."
Lincoln got rid of his rail link some time ago. "They wanted to charge us $5,000 per year for maintenance of the switch that we put in and we maintained," he scoffs. "it was their way of telling us they did not want our business."
In its bi-monthly World Mirror report, the Bureau of International Recycling (BIR) looks at market conditions throughout most regions of the world.
While many commentators in the most recent Mirror say that markets for copper and aluminum should hold up during the fall season, China's evolving role in scrap metal markets continues to generate significant interest.
In his opening remarks, Marc Naton, president of BIR's Nonferrous Metals Division, notes, "Many of you will be the lucky owners of a 'magic' number allocated by AQSIQ (a permit to ship recyclables to China), which will authorize you to export to China." Those applicants who are rejected or miss the deadline must wait more than two years before having an opportunity to re-apply. Naton added, "this highly controversial approach has been disputed by international authorities as being contradictory to China's World Trade Organization commitments. Chinese demand for recyclables will remain the key to our firms' renewed good health until the end of the year."
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|Title Annotation:||Red Metals Report|
|Date:||Sep 1, 2004|
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