Non-ferrous prices keep recyclers guessing

by Brian R. Hook

The year started with another round of volatility in the non-ferrous metal markets. For the first time in nine months, copper prices fell below $6,000 a metric ton.

Prices for copper in early January were down 52 percent since peaking on the London Metal Exchange at $8,660 in May 2006. Analysts cited rising inventories, which hit 192,550 metric tons in early January, the highest level since March 2004.

"We're a little concerned about the start of the year," said John Mothersole, senior economist at Global Insight Inc. in Washington DC. He said that he expects prices in the non-ferrous metal markets to end the year lower than prices at the end of 2006.

Copper's early fall also brought downward pressure on other non-ferrous metals. Mothersole said there is a high degree of correlation in the market due to speculators. He said there is a large block of money from hedge funds. "They tend to be momentum investors. They're not typically concerned with a particular metal," Mothersole said.

"Because they are momentum investors, when they make a move they tend to make a move across all the metals rather than single out a particular metal."

Mothersole predicted a downward drift in copper prices over the next two years, with the price ending 2007 at around $6,000 a metric ton. That will be followed by a further drop in copper to just below $5,000 a metric ton by the close of 23008.

The scenario looks similar with the aluminum prices. Mothersole predicted 2007 would end with the aluminum prices at around $2,500 a metric ton. The slide would then continue in 2008, ending the year with aluminum prices around $2,100 a metric ton.     ...read more