2016 ISRI Commodities Roundtable: Copper finds its footing

2016 ISRI Commodities Roundtable: Copper finds its footing
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It is unlikely that copper scrap markets will be returning to the go-go days of earlier this decade, but a group of speakers at the recent Institute of Scrap Recycling Industries (ISRI) 2016 ISRI Commodities Roundtable Forum expressed cautious optimism that markets are stabilizing, albeit at lower prices.

The 2016 ISRI Commodities Roundtable was in Chicago, Sept. 19-21.

“It is the new normal,” said Randy Goodman, Greenland America Inc., Atlanta, the moderator of the session.

“Lower prices, muted demand and supply shortages are the environment in which scrap metal recyclers are now dealing with,” said Chris Lewon, Utah Metal Works, Salt Lake City. Lewon said presently scrap flows are unlikely to change either up or down. Rather, copper markets will be “bumping” along the bottom area, similar to what has been seen over the past few months.

“During the last two years, we have seen a reduction, not only in prices, but a drop in the flows of material. It makes it a tough environment,” he said. 

In supporting this less-than-rosy outlook, Lewon said that the industry is still coming off a boom in markets, which led to high price and strong demand for copper. Unfortunately, following the soaring markets, the hangover has been painful. Prices have slumped, and the dynamics in the scrap industry have pivoted 180 degrees.

Adding to the challenge for scrap metal dealers, especially those tethered to the export market, Lewon, as well as other speakers, pointed to the strong U.S. dollar, which has made the copper more expensive to other countries.

The theme of a strong U.S. dollar having a negative impact on markets reverberated at several other sessions during the ISRI event.

“In addressing the market from a scrap dealer’s perspective, Lewon noted that some of the capacity cuts, retrenching and other cost cutting have been necessary to bring the scrap industry back into balance.

Joe Bernhardt, representing Aurubis, a Europe-based copper scrap consumer, said despite the obstacles confronting the metal the industry, it will continue to grow. He pointed to the strong growth in the use of copper in automobiles as an area of promise for the industry. He noted that not too long ago the average automobile contained about 20 pounds of copper; today the average automobile contains roughly 50 pounds of copper.

At the same time, in light of new technology the way scrap dealers are extracting copper is changing. More copper is being recovered after the shredding process.

Ed Meir, an analyst with Intl FC Stone, focused much of his remarks on the oversized role that China is playing in regard to the short- and long-term health of the copper and copper scrap market.

He downplayed the doom and gloom sentiment that seemed to surround China and its economy over the last several years.

While acknowledging that markets in China have slowed quite significantly from its days as the go-to source for all types of scrap metal, Meir noted that “in China, things are starting to stabilize.” Although imports and exports have dipped more recently, the decline has not been as extreme as seen earlier in the year.

“If you look at 2016, China didn’t really fall apart,” Meir said. “I thought they would have a real hard time. They pumped a lot of credit and liquidity to grow their economy … Authorities are throwing credit and hoping the economy is growing, but there are mixed results.”

In looking at the macroeconomic figures, Meir pointed out that in China during the first two quarters of the year the economy grew at the 6.7 percent level. Meanwhile, copper imports increased, albeit modestly, which is a significant change from last year when copper imports saw a fairly steep decline.

Supporting his opinion that an improving Chinese economy is close at hand, Meir pointed out that auto sales were up, retail sales were up, fixed asset investments also increased and a number of other infrastructure projects were underway. But what is most promising is that the real estate market in China “has really taken off.”

Unfortunately, these positive figures haven’t yet translated into stronger copper pricing. The main reason, Meir said, is that the new copper supply has been fairly strong. Despite the better demand, the supply side has kept up. “No [copper] producers are cutting back. Mine supply will be up.

“Miners are all making money,” Meir continued. “Even when prices went to $4,300, miners were making money. Nobody was losing. Now, at $4,700, everyone is in the black. That is why we haven’t seen a drop in supply. On the top side, costs are going down.”

The result is that there will likely continue to be large oversupplies of copper on the global market, which should work to keep a lid on copper prices.

Meir touched on a number of reasons why China has returned to importing greater amounts of copper. In addition to demand, which is perking up, there also is more arbitrage of the material. Also, some of the metal is being stockpiled by the government and quasi-government agencies. “And we think there still is some of the metal being used for financing deals,” he added.

Looking to the future, all three speakers say they expect to see little change in the present dynamics. Prices will bounce between the $1.90-$2.50 range through most of next year, with modest demand from the different sources.

Lewon noted that with all the closures that have swept across the industry, the scrap dealer network is close to hitting bottom. At the same time, he added, all the new technology being used by scrap dealers has allowed for more metal (including copper) to be extracted from more challenging materials. “That is what we do well as processors,” he said. “The innovation of this industry takes us along with it. They make us profitable companies.”

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Source: Recycling Today
2016 ISRI Commodities Roundtable: Copper finds its footing
<![CDATA[It is unlikely that copper scrap markets will be returning to the go-go days of earlier this decade, but a group of speakers at the recent Institute of Scrap Recycling Industries (ISRI) 2016 ISRI Commodities Roundtable Forum expressed cautious optimism that markets are stabilizing, albeit at lower prices. The 2016 ISRI Commodities Roundtable was in Chicago, Sept. 19-21. “It is the new normal,” said Randy Goodman, Greenland America Inc., Atlanta, the moderator of the session. “Lower prices, muted demand and supply shortages are the environment in which scrap metal recyclers are now dealing with,” said Chris Lewon, Utah Metal Works, Salt Lake City. Lewon said presently scrap flows are unlikely to change either up or down. Rather, copper markets will be “bumping” along the bottom area, similar to what has been seen over the past few months. “During the last two years, we have seen a reduction, not only in prices, but a drop in the flows of material. It makes it a tough environment,” he said.  In supporting this less-than-rosy outlook, Lewon said that the industry is still coming off a boom in markets, which led to high price and strong demand for copper. Unfortunately, following the soaring markets,…