Prices up in non-ferrous industries
by Brian R. Hook
It has been a rough year for non-ferrous scrap metal
recyclers, but executives on the front lines and experts
who track the industry both predict better times ahead.
“I feel that we are on a very slow upward trend and before
any of us realizes it we’ll all be singing ‘Happy Days
Are Here Again.’ It’s the nature of the cyclical beast,”
said Jeff Solomon, chief executive officer of Globe
Metal Recycling Services Inc.
“Since so many producers shut down high-cost capacity
in the face of low prices, there will be a shortage
of all types of materials by the third quarter of this
Volumes at the scrap metal dealer headquartered in Montreal,
Quebec, were down approximately 25 percent year-to-date
in August, Solomon said. Prices, meanwhile, have recovered
from the lows hit in the last quarter of 2008, but
the prices of non-ferrous scrap metal are still around
25 to 40 percent off of their highs.
The market for non-ferrous scrap is hurting the bottom
line at Sims Metal Management Ltd., the world’s largest
publicly-traded metals recycler, with operations in
North America, the United Kingdom, Continental Europe,
New Zealand and Asia.
“Prices are coming back a little, but volumes are
way down,” said Larry Snyder, executive vice president
for non-ferrous metals, based at the Company’s Chicago
offices. He said that he expects “slow improvement”
throughout this year and into next year.
The metals recycler reduced spending and headcount
to mitigate the impact of the global recession.
“With pricing and demand for scrap improving, and
subject to recovery in scrap generation, we believe
Sims Metal Management is poised for renewed growth,
success and shareholder value creation in fiscal
2010,” said Daniel Dienst, chief executive officer,
in a statement following the release of its fiscal
“We have maintained a strong balance sheet through
low gearing and we more than doubled cash flow from
operations in the past fiscal year, providing us
with the financial flexibility to further expand
our unrivaled global footprint,” he added.
Credit is still a problem for some metal recyclers,
said Bob Garino, director of commodities at the
Institute of Scrap Recycling Industries Inc. in
Washington D.C. The trade association represents
nearly 1,600 companies with more than 7,000 facilities.
“If you are in the Midwest, for example, it is not
that you can’t get scrap. Scrap is available,” Garino
said. “But you are going to have to make sure that
you can pay for it right away. Credit issues are
still affecting how scrap is moving to the consumers.”
Prices in the non-ferrous market may also be ahead
of fundamentals, Garino said. “There is probably
a fairly good argument that we are going to see
a pushback in commodities. I think the market is
a little ahead of itself, based on fundamentals.”
A lot of the influence on prices in the scrap metal
markets follows what is going on in China. If there
is less scrap being shipped to China, prices will
drop. “But I don’t see any of these metals testing
the lows that we saw in the first quarter,” Garino
Inventories, meanwhile, are at an all time low and
scrap shipments are increasing. “We are coming off
such a low base that the idea is that we will build
from these numbers. Whatever slack is closed by
lower Chinese buying and consumption will be mitigated
by an increase in what we are seeing in developed
nations,” Garino said.
Aluminum inventories, for example, totaled 266,500
tons at the end of July, or 42.5 percent below inventories
at the same time last year, according to the Metals
Service Center Institute. The trade association,
which represents the largest single group of metals
purchasers in North America, reports aluminum stocks
were equal to a 3-month supply.
“We are starting to see things begin to percolate,
a sign of a restocking cycle that is characteristic
of the first stages of recovery,” said John Mothersole,
a senior economist who tracks the non-ferrous markets
at IHS Global Insight Inc. in Washington D.C.
“I’m not going to say that it is anywhere near good.
But, I get the sense that the conditions are improving.
They are not great, they are not good, but they
While he expects prices in the non-ferrous scrap
metals markets to improve, he said the markets have
moved a bit ahead of fundamentals. “On a technical
basis they are over bought, therefore are ripe for
at least a temporary, modest pullback,” he said.
Mothersole said the base metal markets are a good
leading indicator for the larger economy by about
six months to a year. He said the prices in the
market are counting on a V-shaped recovery, where
the market drops fast and then returns quickly.
But he expects the recovery to resemble more of
a U-shaped, or possibly even a W profile.
“We have come off the floor fairly fast driven by
Asia, but we are likely to see the strength of the
rebound moderate a little bit over the next six
to eight months,” he said.
The cash prices for aluminum, for example, breached
$2,000 a metric ton in July on the London Metals
Exchange. Since there continues to be an increase
in visible inventories, according to research by
IHS Global Insight, the prices appear to be driven
largely by investor demand, which might suggest
a modest pullback in pricing.
Copper prices also increased from around $5,000
a metric ton at the start of July to over $6,000
a metric ton in early August. The forecasting firm
is predicting an average price of $5,602 a metric
ton in the third quarter and $5,875 for the fourth