Demand remains strong for metals in 2008
The demand for scrap steel continues to soar,
as do the prices. Nations such as China and India continue to
import enormous quantities from the United States.
This is also the case for non-ferrous metals,
which are key staples in the production of construction materials,
industrial applications and consumer products for daily use.
Recycling firms that specialize in metals recovery
are generating substantial profits and making greater efforts
to recover these materials.
In the following interview, Robert J. Garino,
director of commodities for the Institute of Scrap Recycling
Industries, Inc. (ISRI) provided his take on demand and prices
for key metals in 2008.
Question: What do you foresee in terms of the international
demand for scrap steel and the prices that scrap dealers can
charge for this commodity in 2008?
Answer: For domestic steel producers and ferrous
scrap consumers, the early 2008 outlook appears to be reasonably
positive. Goldman Sachs (New York) for example, saw risks in demand
based on last year’s “sluggish” fourth quarter, but it also predicted
“some improve-ment” in the first half of this year, “if only due
to seasonal patterns.” However, it expected U.S. auto production
to be lower this year.
Nevertheless, most analysts today are more confident
than ever that domestic mills will be able to raise prices, even
if demand remains weak, because of the country’s net supply shortage
of finished steel, relatively low levels of inventories and reduced
Several steel analysts also see cost pressures
building that could underpin finished steel prices this year.
On the price front, earlier estimates for finished
steel such as HR coil and No.1 HMS were under the price response
to date. Since ISRI does not forecast prices, we’ll leave that
exercise to others.
Question: Over the past number of years China has
been exporting a serious amount of scrap metal to the U.S. Is this
expected to continue?
Answer: In 2007, for the fourth consecutive year,
global steelmakers surpassed the billion ton mark in their crude
steel production, with China serving as the dominant producer.
It is estimated that China’s crude steel production
ended 2007 around 490 million mt, representing more than one third
of total global output. Even though it consumes the vast majority
of its production domestically, China has become a major steel
exporter. Steel analysts note that China’s exports in 2008 may
be the swing factor in the global steel market balance. Forecasts
by the China Iron and Steel Association place 2008 crude steel
production at 540 million mt, which would be a 10 percent increase
Locker Associates (New York) expects the Chinese
government will curb the country’s steel production. Other factors
also could mitigate China’s global impact and influence on prices
for both finished steel and scrap, including export taxes, the
elimination of value-added tax rebates and a continued strong internal
Question: What is your take on the production of steel
in the U.S. for 2008 and the situation regarding imports?
Answer: The American Institute for International
Steel (AIIS) projects that steel shipments last year reached 104.5
million net tons, down from the 109.5 million tons shipped in 2006.
Despite this decline, it expects U.S. steel consumption to increase
due to de-stocking.
The AIIS also estimated total U.S. steel imports
at 33.5 million tons in 2007, compared with 45.3 million tons in
2006. U.S. exports of steel soared last year, reaching a projected
10.9 million tons compared with 9.7 million tons the previous year.
Question: Will demand and prices for copper continue
Answer: For 2007, market watchers expected new
copper supply to rise at least as fast as consumption, leading
to a statistical surplus for the year.
While the World Bureau of Metal Statistics and
International Copper Study Group reported metal deficits through
most of last year, ICSG’s October forecast projected a 110,000
mt surplus for all of 2007. In 2008, ICSG expects a larger surplus
of about 250,000 mt based on estimated global consumption of 18.7
million mt against projected refined copper output of almost 19
Some analysts maintain, however, that copper
will not be oversupplied due to current conditions.
Others contend that global consumption, led by
China, is always understated and that overall consumption will
post a year-on-year increase despite an assumed slower pace of
Western World industrial production and metal usage in 2008.
For this year, the price forecast - distilled
from projections in fourth-quarter 2007 and perhaps overly influenced
by the upbeat sentiment at LME Week in the second week of October
- is for copper to average about $3.10, with predictions ranging
from $2.61 (Natixis, New York) at the low end to a high of $3.68
(Mitsui Bussan Commodities, London). This consensus price is positive
compared with Reuters’ July 2007 midyear forecast of $2.85 a pound.