China has grown accustomed to a spring-time improvement in market conditions but demand has remained relatively flat in the early weeks of second-quarter 2008. Analysts blame a combination of factors, including: commodity prices reaching historical peaks; a slow-down in cash-flow; and government measures to control inflation. In practical terms, the copper price in Shanghai is 10% lower than at the same stage of last year, aluminium stocks are on the increase, and zinc and lead production has returned to normal after the severe snowstorms of earlier this year.

Cash-flow and financing difficulties have also affected scrap processors in the Middle East, with many scrap stockists liquidating their positions and selling their non-ferrous metals. Some operators have cashed in their non-ferrous stocks in order to finance investments in ferrous scrap, the price of which has soared in recent times.

In New Zealand, a country expected to sign a free trade agreement with China, the largest consumer of aluminium scrap will start up its furnaces again during May, it has been reported.

The aluminium market continues to draw support from the energy crisis in South Africa where a system of structured power cuts is now in place countrywide. The continued disruptions to power supply have led to a downturn in scrap availability as manufacturers and processors suffer production interruptions. With the cost of electricity expected to soar 60% in the next calendar year, followed by 40% in each of the ensuing two years, industrial production costs will rise dramatically and commodity prices will be further underpinned.

In India, meanwhile, demand for aluminium is increasing faster than national GDP and is expected to remain strong in the coming months - with the exception of a temporary dip in June and July for ‘cyclical reasons’. As a result of the zero duty on aluminium scrap, the country’s extrusion industry and secondary wire rod producers have increased imports of prime grades such as Talon, extrusion scrap and the 1000 series.

Domestic arisings of copper scrap from electric motors and electronic equipment have been healthy while imports have been negligible. At the same time, India’s brass scrap imports have been replaced by domestic arisings while the country’s zinc scrap imports have also fallen.

Aluminium has also turned in a strong performance in the USA on the back of strong LME and alloy prices. The used beverage container (UBC) market is witnessing healthy supply and demand, while Twitch supply is tight owing increased export consumer buying. Copper demand has steadied among US consumers and spreads have shown little change.

Exporters have continued to struggle in the face of rising transportation costs as well as the on-going scarcity of containers and vessel space for export shipments, to the extent that there is evidence of boxes being loaded in the south east of the USA and then being taken to the west coast to reach vessels with space. Delays of two to four weeks are being reported from the time of contract negotiation to the date of shipping the metal.

Across in Europe, there has been a strong upturn in demand for non-ferrous scrap within Italy but the strength of the Euro in relation to the US dollar is continuing to hamper the country’s exporters. Spot demand for copper scrap among traditional consumers has been healthy; leading refiners and semis dealers are working at around 70% capacity. Good availability has been seen for both copper and brass scrap, although demand for the latter has suffered as a result of a shortage of orders from leading consumers holding more than adequate stocks. Aluminium scrap demand has remained low among Italy’s leading producers of secondary billet and plate, with the result that many scrap dealers have chosen to export much of their production. Meanwhile, the high price of lead has cooled domestic demand for scrap.

Lead discounts in the UK have narrowed slightly and volumes remain steady. Meanwhile, exporters have reported reduced interest in copper scrap from Chinese purchasers in response to high red metal prices. Prices for commercial grades of aluminium scrap have inched higher in the UK.

April brought a dramatic drop in the prices of the major non-ferrous metals in Russia, with abnormally good weather conditions leading to healthy scrap availability throughout the country. These latest price movements have created uncertainty among consumers

as to fair market values for the different metals.

Overall, there are signs of continuing optimism among a large proportion of non-ferrous scrap specialists. In Germany, for example, a survey of members of the Verband Deutscher Metallhändler (VDM) revealed that 52% of respondents have experienced consistently good levels of business over recent months and that 13% have even witnessed an improvement in trade. Some 22% of the companies surveyed expected business to improve in the second quarter while 65% anticipated stability at existing high levels. Some 78% of the companies did not expect to witness metal shortages over the coming months.

Acknowledgement

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