Solid demand for non-ferrous scrap may not help margins

However, the BIR's UK member has warned that anticipated “solid demand” from China is “unlikely to offer significant support to narrowing margins”.

” We are beginning to take the view that the solid demand anticipated from China in the fourth quarter is unlikely to offer significant support to narrowing margins. “
– Michael Oppenheimer, Mountstar Metal Corporation
In its summer report, the BIR's non-ferrous metal division observed that the traditional summer slow-down in the scrap metal sector has been compounded by Chinese traders cutting their imports.

As well as container unloading problems in South China, BIR non-ferrous division president Marc Natan said Chinese traders had responded to high scrap prices by reducing their purchase volumes – particularly for scrap copper.

Mr Natan said: “Chinese copper scrap imports have dropped almost 7% by the end of July despite the country's economic growth rate of around 10%. According to Chinese buyers in the know, their purchases since June have been particularly lacklustre and discouraging.”

The non-ferrous division president explained that Chinese metals importers objected to a difference in the prices seen for scrap copper between the metal exchanges in London and Shanghai, a difference that reached almost $800 in May.

However, Mr Natan noted that new obligations on companies exporting metals to India is being postponed until November, and said: “Traditional consuming markets such as India and China should provide the market with renewed impetus in later months of the year.”

China
The BIR non-ferrous division's Chinese member, Ben Lee of Alco Resources Ltd, confirmed that “high prices have had a negative impact on consumption, since end users are unable to accept such high levels over a sustained period.”

Mr Lee said some users of copper had sought alternative materials because of the high prices, and that as a result “copper prices will find it easier to fall than to rise”.

The BIR non-ferrous metal division's UK member, Michael Oppenheimer of Mountstar Metal Corporation, warned that discounts are being offered for a wide range of metal grades as the market seeks some sales during the slow-down period.

He said: “Discounts remain comparatively wide for all grades. Indeed, we are beginning to take the view that the solid demand anticipated from China in the fourth quarter is unlikely to offer significant support to narrowing margins.”