For the week ending Friday, November 11 th
Commodity prices remained volatile this week largely in response to
shifting expectations regarding the ability of European politicians to
resolve the on-going debt crisis there. Nonferrous prices see-sawed this
week as LME official 3-mo. aluminum dipped to as low as $2,111.50/mt
on Tuesday, while LME 3-mo. copper dropped to $7,471/mt on Thursday
morning before rebounding late in the week.
In New York, COMEX
December copper ranged from as high as $3.65/lb. to as low as $3.32/lb.
in intra-day trading this week, but steadied by week’s end following
better than expected economic news in the U.S. and brightening European
prospects. Other commodity prices followed similar patterns, with NYMEX
crude oilprices falling below $95/bbl on Wednesday before firming to
near $99/bbl late in the week, while gold prices swung from below
$1,750/to to recover near $1,790/to by week’s end. On Wall Street, stock
prices remained volatile as well, with the Dow Industrials plunging by
nearly 390 points on Wednesday to close at 11,780.94 before retracing
those losses in the next two trading sessions.
On Friday, base
metal prices got off to a mixed start, with Reuters reporting initially
softer LME 3-mo. aluminum, nickel and zinc prices this morning, while
official LME 3-mo. copper steadied around $7,480/mt. But signs of
political progress in Italy supported commodity and security prices as
the day progressed, as LME 3-mo copper reportedly firmed above $7,650/mt
late in the day. Commodity prices in the U.S. also advanced, with
COMEX December copper up around 9 cents per pound to $3.46/lb. in
afternoon trading, while crude oil and gold prices firmed around $99/bbl
and $1,790/to, respectively.
On Wall Street, the Dow
Industrials were up around 2% in afternoon trading and look set to
finish the week in positive territory following sharp mid-week losses,
while the Euro strengthened above $1.37. Macro news… Markets
participants were keeping a close eye on Europe again this week as
shifting political fortunes (and a scare from S&P as they mistakenly
notified some subscribers of a downgrade to France’s credit rating)
kept investors guessing. But by week’s end, the Italian Senate’s
approval of budget amendments that are expected to promote growth, in
addition to paving the way for Silvio Berlusconi’s resignation, as well
as expected changes in the Greek political leadership were largely
cheered by markets. Which is not to say that Europe is out of the woods
as the European Commission downgraded its 2012 growth forecast for the
EU-27 to 0.6%, while the 17 (for now) economies in the Euro zone are
expected to only grow 0.5% next year.
While fears about a recession in Europe have not abated much as of
late, results from a recent poll of economists by the Wall Street
Journal now “only” put the odds of a U.S. recession in the next 12
months at 25%. Better than expected economic news in the U.S. has
bolstered expectations from economists and consumers alike, as weekly
claims for unemployment dropped to 390,000 for the week ending November
5, while the initial November reading on consumer sentiment from the
University of Michigan shows an increase from 60.9 to 64.2.
There was some goods news on the export front as well as the U.S.
trade deficit contracted to $43 billion in September, and although
overseas demand for U.S. scrap leveled off in September, export sales
through the first nine months of the year have already surpassed last
year’s record total. Scrap Trade The latest trade figures released
from the U.S. Census Bureau yesterday show that overseas demand for U.S.
scrap remained resilient through September, with total scrap exports in
September valued at $3.6 billion, up around 45% from September 2010
shipments, while year-to-date exports have already broken last year’s
record for the whole year.
Here are some highlights: - U.S. scrap exports through just the
first nine months of 2011 have already reached $29.9 billion according
to the latest figures from the U.S. Census Bureau, already surpassing
last year’s record and representing a 41% increase over Jan-Sep 2010
exports. -The increased YTD export sales reflect this year’s generally
higher price levels, as well as increased physical demand, as the total
volume of loadings during Jan-Sep 2011 advanced 20% from last year to
reach 39.5 million mt. -By destination, the largest overseas markets
for U.S. scrap this year include: China $8.7 billion (+42%); Canada $2.8
billion (+27%); Turkey $1.9 billion (+80%), South Korea $1.7 billion
(+34%); and Taiwan $1.4 billion (+46%). -By commodity, the value of
year-to-date shipments are up significantly for each major commodity
group including: aluminum scrap $3.1 billion (+34%); copper scrap $3.9
billion (+54%), ferrous scrap $8.15 billion (+52%), recovered paper and
fiber $2.9 billion (+19%) and plastic scrap $788 million (+16%). See
below for more commodity specific details.
Ferrous…
Ferrous scrap prices since our last report have reportedly come off
sharply, with Scrap Price Bulletin indicating a composite price for No. 1
HMS early this week of $375.83/gt, down from $399.17/gt one week ago
and down over $40/gt in the last month. The price drops have been
attributed to diminished overseas buying interest and softer finished
steel prices as steel production waned. The American Iron and Steel
Institute reported that domestic raw steel production for the week
ending November 5 th decreased 0.4% to 1.789 million net tons, while
capacity utilization eased to 72.2% following a drop to 73.9% in
October. Despite the weakness in raw material prices and softness in
finished steel prices -- Platts reports a midpoint HRC of $632.50/st
ex-works Indiana this week, down from $640/st late last week -- several
mills including AK Steel, RG Steel, Severstal and most recently Nucor
have reportedly announced flat rolled price hikes of $30-$50/st.
The latest government trade data confirm cooler overseas demand in
September, as the total monthly value of ferrous scrap exports from the
U.S. decreased from $1.24 billion in August 2011 to $905 million in
September, while still representing a 48% increase year-on-year. This
coincided with a monthly drop in volume from 2.7 million mt in August to
2.0 million in September, which was still up around 25% from September
2010. The monthly decline reflected lighter loadings for Turkey (458,000
mt, down from 800,000 mt in August) and China (355,000 mt, off from
around 457,000 mt in August) as well as weaker demand from Taiwan, South
Korea and India. But for the year-to-date, Jan-Sep ferrous scrap
exports jumped 31% by volume to 18.4 million mt and 52% by value to
$8.15 billion. The largest U.S. ferrous scrap export markets so far this
year include:Turkey $1.9 billion (+80%), China $1.6 billion (+31%),
Taiwan $1.1 billion (+97%), South Korea $1.0 billion (+37%) and Canada
$374 million (+24%). e Of note, as export demand has increased overall
this year, recent figures from the U.S. Geological Survey show that
total domestic consumption of purchased and home ferrous scrap during
Jan-Aug 2011 reached 36.9 million mt, up from around 34.0 million mt
during Jan-Aug 2010: further evidence that the U.S. scrap supply is able
to simultaneously meet demand at home and abroad. Nonferrous… As
indicated, nonferrous prices this week remained volatile and were
trending lower for the week until Friday’s rebound.
As refined prices came under pressure, Platts was reporting somewhat
tighter copper scrap spreads, with Bare Bright indicated at 8 cents
under March COMEX this week, while No. 1 and No. 2 were indicate at 26
and 40 cents under, respectively, or 1-2 cents lower than one week ago.
Secondary aluminum prices were reportedly flat to slightly easier this
week as well with sheet and cast indicated around 67-70 cents, siding
mostly in the up 60’s to low 70’s and MLC in the lower 70 cent range.
Initial industry reports from the American Copper Council meetings in
Florida this week indicate expectations for steady to mildly improving
market conditions in 2012. Meanwhile, recent Census Bureau figures show
that the monthly value of U.S. copper and aluminum scrap exports in
September fell to $416 million and $368 million, respectively, down 15%
and 4% from August levels but, as with the ferrous exports, up
significantly year-on-year.
Despite a cooling off in September, the cumulative value of
nonferrous scrap shipments from the U.S. are up sharply this year,
including: copper scrap $3.9 billion (+54%), aluminum scrap $3.1 billion
(+34%), nickel scrap $99 million (+48%), zinc scrap $69 million (+15%)
and lead scrap $29 million (+14%). By volume, copper and copper alloy
scrap exports decreased from 119,000 mt in August to 104,000 mt in
September, but year-to-date movement of over 940,000 mt is up 26% over
the corresponding period last year. Cumulative aluminum scrap exports,
including UBCs and RSI, are up 13% so far this year to 1.6 million mt.
For copper scrap, China remains far and away the most important export
destination at $2.67 billion (+56%), followed by Canada $238 million
(+52%), South Korea $192 million (+77%), Hong Kong $117 million (-32%)
and Germany $107 million (+138%), among others. Here’s the Jan-Sep 2011
breakdown by grade:
Editor’s note: We’ll take a look at the latest recovered paper and
plastic scrap export numbers in next week’s Friday Report. ****** And
now here’s a preview of the next Marketrends column that will appear in
Nov/Dec issue of Scrap magazine, our absolutely favorite magazine
around: October 28, 2011 Aluminum Since early September, aluminum
prices have been affected more by global economic worries than by market
fundamentals. Though the light metal’s prices generally were less
turbulent than those of other metals, their volatility was rising. LME
three-month aluminum fell from $2,438.50 a mt in early September to an
annual low of $2,137 in mid-October, despite falling LME inventories
(down more than 80,000 mt since Sept. 1); a 10-percent cumulative
increase in global aluminum consumption through September, according to
CRU Group (London); and widespread expectations that aluminum and
aluminum scrap use will continue to grow in the years ahead. UBS
(Zurich), for one, expects Chinese automotive, housing, and
infrastructure demand to help increase global aluminum consumption 7.2
percent a year, on average,until 2015.
Though few expect a repeat of late 2008/early 2009, when aluminum
prices dipped below 60 cents a pound, Fastmarkets.com (London) recently
lowered its annual forecasts to $2,400 a mt for 2011 and $1,850 for
2012. Copper The red metal remains particularly sensitive to every
perceived tremor in the economic and financial landscapes. LME
three-month copper lost one-quarter of its value from early September to
October, slipping as low as $6,812 a mt on heightened concerns about
the European sovereign debt crisis and potentially slower growth in
China and elsewhere. Copper market fundamentals paint a less bearish
picture, however, with the global refined copper market posting a
deficit of nearly 120,000 mt through July 2011 due to supply disruptions
such as the strike at the Grasberg mine in Indonesia, the International
Copper Study Group (Lisbon, Portugal) reports.
Though copper prices rebounded above $8,000 a mt in late October in
response to the latest European debt plan and improved U.S. economic
growth, analysts continued to slash their price forecasts for 2011 and
2012. Goldman Sachs (New York), for example, projects average copper
prices of $8,827 a mt in 2011 and $8,750 in 2012. Iron and Steel Both
raw material and finished steel prices were trending down at the start
of the fourth quarter, including a decrease of $50 a short ton for U.S.
hot-rolled coil since mid-September, according to Platts (New York).
U.S. ferrous scrap prices, which have been unusually stable for much of
the year, also came under pressure in October amid reports of softer
overseas interest. Steel production remained high, however,with world
crude steel production showing an 8.2-percent increase through
September, to more than 1.1 billion mt for the first nine months of the
year, the World Steel Association (Brussels) says.
Given this year’s improved steel production and capacity utilization
rates—and barring a sharp downturn in consumption—many analysts expect
steel mills to begin restocking and raw material supplies to undergo a
rebalancing period, both factors that will affect market conditions
heading into 2012. Lead and Zinc Among the base metals, lead and zinc
are among the worst price performers so far this year, with LME
three-month prices down more than 20 percent from the end of 2010
through late October. The sister metals remain under pressure due to the
persistent global economic concerns and their ongoing global market
surpluses. The International Lead and Zinc Study Group (Lisbon) predicts
that the global refined lead market will remain in surplus in 2011 and
2012, while the world refined zinc market will post even larger
surpluses than lead. As a result, many forecasters have reduced their
lead and zinc price forecasts.
Standard Bank (Johannesburg), for example, lowered its average lead
price forecasts for 2011 to $2,450 a mt and 2012 to $2,485 while cutting
its zinc price forecasts for those years to $2,200 and $2,075,
respectively Nickel and Stainless Steel The nickel and stainless
steel price roller coaster showed no signs of slowing in September, as
LME three-month nickel prices plunged as low as $18,050 a mt in late
September, down sharply from their February highs above $29,000.
Lackluster stainless steel demand, expected nickel market surpluses, and
shifting investor risk appetites have contributed to price volatility
this year. The International Nickel Study Group (Lisbon) anticipates a
small global nickel surplus in 2011, while the International Stainless
Steel Forum (Brussels) expects world stainless steel production to post
only modest gains this year. Though reports indicate that diminished
scrap availability and reduced stainless steel scrap demand have
balanced each other recently, market participants remain cautious going
forward. Paper and Recovered Fiber For most of 2011, U.S. recovered
paper prices exhibited more resilience than tags for other scrap
commodities, thanks to healthy domestic consumption and improved
overseas demand. U.S. scrap paper exports through August were up 14
percent compared with the corresponding period in 2010, as large
increases in shipments of OCC, high-grade deinking, and pulp substitutes
more than offset lighter demand for printed news and mixed paper,
according to data from the U.S. Bureau of the Census (Washington,
D.C.).
More recently, however, recovered paper prices have come under
significant pressure, as reflected in consecutive decreases in the ISRI
Recovered Paper Index in September and October. With market conditions
still volatile, industry analysts and market participants expect steady
to weaker recovered paper prices in the fourth quarter. This Week’s
Quote: “When your work speaks for itself, don't interrupt.” -- Henry J.
Kaiser This Week’s Lawyer Joke: A local United Way office realized
that the organization had never received a donation from the town's most
successful lawyer. The person in charge of contributions called him to
persuade him to contribute. "Our research shows that out of a yearly
income of at least $500,000, you give not a penny to charity.Wouldn't
you like to give back to the community in some way?" The lawyer mulled
this over for a moment and replied, "First, did your research also show
that my mother is dying after a long illness, and has medical bills
that are several times her annual income?" Embarrassed, the United Way
rep mumbled, "Um ... no."
The lawyer interrupts, "or that my brother, a disabled veteran, is
blind and confined to a wheelchair?" The stricken United Way rep began
to stammer out an apology, but was interrupted again. "or that my
sister's husband died in a traffic accident," the lawyer's voice rising
in indignation, "leaving her penniless with three children?!" The
humiliated United Way rep, completely beaten, said simply, "I had no
idea..." On a roll, the lawyer cut him off once again, "So if I don't
give any money to them, why should I give any to you?
