Issue N° 127 – July / August 2014 - mrai.org.in · important region affect the world’s non-ferrous scrap industry. ... leading to higher levels of activity and supply from the

1TThhiiss MMiirrrroorr iiss aallssoo aavvaaiillaabbllee iinn tthhee mmeemmbbeerrss’’ aarreeaa ooff oouurr wweebbssiittee wwwwww..bbiirr..oorrgg

IIssssuuee NN°° 112277 –– JJuullyy // AAuugguusstt 22001144

IInntteerreesstt iinngg aanndd eedduuccaatt iioonnaall

Our Miami Convention provided an opportunity for

us to gain insight into Latin America, a region of

the world that is growing in importance in the non-

ferrous scrap business. Our two speakers - Luis

Fernando de Souza and Alejandro Jaramillo - made

presentations that were both interesting and educational,

exactly what we asked them to provide for our members.

We again take the opportunity to thank them for their efforts.

This is an example of the division’s desire to bring interesting

discussion to the table, and I believe from members’

comments that we accomplished our objective.

Our Convention in Paris will have the division focus on

Europe, and particularly how economic conditions in that very

important region affect the world’s non-ferrous scrap industry.

We’ve put together a team of experts, all Non-Ferrous Metals

Division board members, to assemble a panel of speakers

that will no doubt be of great value to us all.

As we enter the traditionally quiet summer months, let’s hope

that the autumn brings with it a more positive atmosphere for

our business.

by Robert SteinAlter Trading (USA)

President of the Non-Ferrous Metals Division17th July 2014

International

Brazil(by Bianca Vicintin Abud, Tecal Aluminio Da Amazonia /Metalur Group, Board Member of the BIR Non-Ferrous Metals Division)

Brazil ground to a halt during the football World

Cup. Industries and commercial enterprises

worked half-days when the Brazilian team

played. Whatever upsides the event will have

brought to the country, especially in terms of tourism, will be

evident only in the long run. There is word that numbers for

the second quarter will show recession - and that was before

the football tournament even began.

World Cup organisation was a success and 98% of tourists

said they would recommend Brazil as a tourist destination,

with people praised for their hospitality and cordiality. But in

a country with many more pressing needs than building

billion-dollar stadiums, the event - the most expensive of all

World Cups - attracted plenty of criticism.

Accusations of corruption were numerous, President Dilma

Rousseff was hissed at her public appearances and the

failure of the Brazilian team supposedly will affect the result

of the presidential elections in October. Stock markets have

already indicated a positive reaction to the president’s

possible fall.

BBIIRR WWoorrlldd MMiirrrroorr:: NNoonn--FFeerrrroouuss MMeettaallss JJuullyy // AAuugguusstt 22001144

2This Mirror is also available in the members’ area of our website www.bir.org

Scrap buying and selling have been very slow; the only grade

to witness price and demand support is UBC, greatly

influenced by Novelis. There are great expectations of an

improvement for the second half of the year.

Average per-tonne trading prices are as follows: UBC at

US$ 1690; Taint Tabor at US$ 1640; Tense at US$ 1500;

Extrusions at US$ 2440; EC Wire at US$ 2800; Berry at

US$ 6901; and Birch/Cliff at US$ 6430.

Middle East(by Ibrahim Aboura, Aboura Metals FZCO, Jordan)

I would like to congratulate BIR for a successful

conference in Miami last month and offer special

thanks to the Non-Ferrous Metals Division’s

President Robert Stein for all the hard work and

expertise shared with the board and the BIR community.

The Middle East’s non-ferrous markets have been stable over

the past few weeks. LME prices for copper and aluminium

climbed to, respectively, US$ 7100 and US$ 1900 per tonne,

leading to higher levels of activity and supply from the region’s

non-ferrous scrap merchants.

Despite the slowdown during the holy month of Ramadan and

the ongoing political turmoil in the region, especially with the

conflicts in Iraq and Syria, the market has been performing

well with steady trading levels among the region’s suppliers

and exporters when comparing the recent period to this year’s

first quarter.

In the international arena, the geopolitical conflict involving

Ukraine and Russia remains the main topic on the US and

European agendas, and is still headline news for the

international markets and traders. The major markets for

Middle Eastern exporters - China and India - have also been

facing some slowdown, with China still out of the market and

India’s demand dropping in recent weeks as importers await

the new government’s budget which was proposed a few days

ago.The regional market is expected to see more trading post-

Ramadan as the LME continues to perform well.

United States(by Andy Wahl, Newell Recycling of Atlanta Inc.,Vice-President of the BIR Non-Ferrous Metals Division)

Now that all the excitement of the World Cup is

at an end, it is time for us all to return to buying

and selling scrap. I think I would have preferred

another four weeks of soccer, but life goes on.

The unemployment rate in the USA dropped to an adjusted

6.1% in June and continues to show improvement.

Automotive production rates continue to track as forecasted

although big price discounts are on the table during the slow

summer months along with year-end model changes.

As for metals, very little has changed with the exception that

copper is trading up again and so are Midwest premiums on

aluminium. The most exciting news is the bright outlook for

aluminium in the automotive and aerospace industries in the

near future.

For the most part, metal prices are unchanged - except for

the red metal increase owing to COMEX and LME gains.

Zorba and Twitch prices have seen modest increases of,

respectively, US$ 40 and US$ 60 per tonne when compared

to June, but these too are a result of adjusted pricing on the

LME and NASAAC. Zebra for export has benefited mainly

from the increase in value of stainless along with the red

metals. Price increases of around US$ 100-150 per tonne

have been the result when compared to June sales, and

they continue to track upwards with increases on the LME.

The UBC market continues to be flat, with mills reporting

material booked for two to three weeks out for deliveries.

The scrap battery market also remains flat even with

currently high lead prices. The bigger issue at present is

securing trucks for timely deliveries of scrap as the produce

season always results in higher trucking prices owing to

increased demand, leading in some cases to a 50-60% hike

in freight rates during that short time.



Mexico(by Alejandro Jaramillo, Glorem SC,Board Member of the BIR Non-Ferrous Metals Division

Dealing with fiscal reforms continues to be one of

the main concerns not just for recyclers but for

Mexican industry as a whole. Among the many

changes were modifications to the IMMEX

programme, better known as “Maquiladora”. In the past under

this scheme, domestic and foreign companies could import

raw materials free of any tax as long as they exported the

finished or semi-finished products that they produced along

with this scrap. Now importing companies are required to pay

VAT on all their imports - and only after exports can they apply

for a refund. In Mexico, the process of obtaining a refund is

cumbersome. To make matters even more complicated, the

ease and speed with which the refund is made is contingent

on a certification issued by the tax system - and this

certification process is burdensome and discretional.

The American Institute for International Steel has already

raised red flags about the disruption caused by the

inconsistent and discretional application of these new

regulations. This issue transcends scrap and also affects

consumption given that, in the face of uncertainty, consumers

are being extra-conservative in their purchases.

Currently and during recent weeks, Mexico’s congress has

been discussing - and in some cases, approving - reforms to

the communications and energy sectors that many hope will

spark investment in the country as well as more competitive

conditions for business and industry. Understandably, some

large sectors are hesitant about embracing the reforms and

their potential benefits as recent history has taught them that

reforms frequently only assist a limited group of monopolies

and business interests rather than the economy as a whole.

On a brighter note, the automotive industry continues to

boom. In June, production was 7.9% higher than in the same

month last year; in the year to June, output climbed 7.4% to

1.597m units. During the first half of this year, Mexico edged

out Brazil as Latin America’s largest car producer.

Also during the last few weeks, BMW has announced that it

will be building a new plant in Mexico. To entail investment

of US$ 1bn, the new plant will be located in the Bajio region

and will have the capacity to produce 150,000 units a year.

The Mexican peso remains stable and has even gained

moderate ground against the US dollar, with the exchange

rate standing at MX$ 12.9436 at the time of writing. During

the last 30 days, its range has been between MX$ 12.9420

and MX$ 13.1153 to the dollar. Meanwhile, Mexico’s central

bank has reacted to the poor growth observed during the

first quarter of the year and cut its benchmark rate; the TIIE

interbank exchange rate now stands at 3.2972%.

Australasia (by Paul Coyte, Hayes Metals, New Zealand,General Delegate to the BIR Non-Ferrous Metals Division)

Market conditions remain tough in both

Australia and New Zealand, with many

merchants reporting lower trading volumes.

Secondary consumers remain steady with their

orders and supply is matching demand.

The Reserve Bank of New Zealand has again raised interest

rates, the third such increase in an attempt to curb the heat

within the domestic economy. The most important effect of

this is on the exchange rate between the New Zealand dollar

and other major currencies, and therefore on all exporters.

Despite the uptrend in LME pricing, there has been little

upward impact on converted base metal prices in New

Zealand dollars. Some analysts believe that the New

Zealand dollar is now overvalued by 20% - something which

will continue to challenge those metal merchants who

export.

The Australian economy, by contrast, is still under significant

pressure owing to the continued slowdown. The Reserve

Bank of Australia reduced the official cash rate last quarter

as a further sign of the country’s difficulties.

BIR World Mirror: Non--Ferrous Metals JJuly / AAugust 2014


Pacific Rim(by Shigenori Hayashi, Daiki Aluminium Industry Co., Ltd.,JapanBoard Member of the BIR Non-Ferrous Metals Division)

The Japanese economy experienced a

compensatory decline in demand following the

upturn ahead of the consumption tax hike in

April. Since May, however, sales of cars and

other consumer durables have shown signs of having

bottomed out and business sentiment has been improving.

The Bank of Japan believes the economy is recovering

steadily following the tax hike and forecasts this recovery will

continue. It is anticipated that additional monetary easing and

other measures will be taken on a continuous basis, if

necessary, in order to underpin the economy.

Car sales in June increased by 0.4% from the previous year to

453,000 units - the first positive growth in three months after

year-on-year decreases in April and May as a reaction to the

last-minute surge in demand prior to the tax hike. In

comparison, when the consumption tax rate was raised in

1997, it took 21 months to post a year-on-year sales increase.

While demand for aluminium alloy decreased slightly in the

second quarter when compared to the same period last year,

steady vehicle production owing to increased sales of

compact cars resulted in avoidance of the significant decline

initially anticipated. Car production is forecast to remain strong

in the third quarter and demand for aluminium alloy will also

continue to be relatively stable.

The aluminium scrap market has remained healthy since

June, with a gain in the LME price and an increase in the

Japanese premium for primary aluminium ingot in the third

quarter to US$ 400-410 per ton. With the growth in exports to

South Korea, supply of scrap is currently very tight.

Meanwhile, South East Asia has begun in part to face

economic slowdown. Thailand, in particular, is expected to

reduce car production by some 18% from last year to around

2 million units in 2014 owing to a number of factors, including

the unstable political situation.

China(by David Chiao, Uni-All Group Ltd, USA, Senior Vice-President of the BIR Non-Ferrous Metals Division)

Prices of all metals fell in the first six months of

this year and then bounced back strongly after

the Beijing government announced a “micro

stimulus package”. On the Shanghai Futures

Exchange, copper went up from RMB 43,000 to RMB 52,000

per tonne.

It is not clear whether metal prices are being impacted by

China’s “micro stimulus package” or by the recovery in the

world economy. According to statistics from the Beijing

government, China’s PMI has been above the 50 mark for

three consecutive months; this has combined with the Dow

Jones index remaining above 16,000 and with the US

unemployment rate dropping below 6%.

In the first five months of this year, meanwhile, Chinese

imports of copper scrap were 14% lower than in the same

period of 2013. Overall, it seems that the recent bull market

cannot be ascribed to a single factor.

The situation surrounding Qingdao has led to more restricted

commercial lending and foreign currency exchange

procedures with regard to the metal industries and has also

delayed the customs release process for all scrap imports.

As regards scrap, China is still not actively chasing bullish

market prices because summer is traditionally a season for

maintenance and low production. Importers are waiting for

more firm demand from consumers at a time of fears the

hedge funds will retreat from the metals market.

In the coming days, Beijing is due to publish updated

economic statistics which may lead to more or fewer “micro

stimulus” measures.



India (by Dhawal Shah, Metco Marketing (India) PVT Ltd, Vice-President of the BIR Non-Ferrous Metals Division)

July 10 was the date when the whole of India - from

students to housewives, from industrialists to

farmers - expected the new Prime Minister’s magic

wand to work for them. They hoped that all the

anomalies of previous budgets and the flawed policies of the

previous government would be overhauled.

It was supposed to cheer the Common Man. When the budget

was delivered, it was straight talking and with no frills. Far

from being spectacular or sensational, its mainstays were

increased foreign direct investment in core sectors like

defence and insurance, curtailment of the fiscal deficit,

promotion of construction and building infrastructure, and

minor income tax exemptions, as well as a few other populist

measures.

The stock market, which had gone into overdrive prior to the

budget, responded with some paring back. However, such an

instant reaction seems to be a case of missing the woods for

the trees. There has been a significant shift in the macro

variables over the last eight to 10 weeks. Retail inflation has

slowed, subsidies have declined and the deficit has contracted

- all of which are very positive indicators. And so while this

budget may not have altered conditions greatly overnight, it

could be viewed as a precursor to some major structural

changes in the Indian economy over the next five years.

Secondary smelters in India are going through tough times.

An acute labour shortage (a routine feature during the

summer period) and tight cash-flows have kept the industry

mood sombre. There was a pick-up in car sales during May

and June but this has not translated into better business

conditions for alloy makers or secondary metal producers as

operating margins remain squeezed.

Despite increases on the LME, local prices for some items -

particularly brass - have shown a decline. Raw material feed,

which is mainly met through imports, has also remained tight,

with better prices in alternative markets like the EU and China.

Supplies from the Middle East have slowed owing to the holy

month of Ramadan.

The monsoons have just set in, and we hope that it starts

raining good times for our industry.

South Africa (by Sidney Lazarus, Non-Ferrous Metal Works (SA) (Pty) Ltd,Board Member of the BIR Non-Ferrous Metals Division)

The domestic market for non-ferrous metal was

reasonable during June because the stated

intention of the National Union of Metal Workers

of South Africa (NUMSA) to strike from July 1

prompted most companies to build stock for their customers.

The strike is continuing at the time of writing but hopefully

will be resolved shortly; the proposal is for a 10% increase

for the first year, 11% for the second year and 12% for the

third year, which equates to more than the 10% increase for

three years.

Many metal industry players’ properties have been damaged

during the strike and intimidation of workers has been

prevalent; as a result, very few have been coming to work

during the strike. Furthermore, not much scrap metal is

being generated at present owing to the strike.

Meanwhile, draft amendments to export control guidelines

are still being finalised and clarification is awaited on certain

points in order to see the way forward. There is evidence of

export permits being blocked and yet applied for at the same

time, thus causing confusion in the marketplace.

In other developments, the South African rand has

weakened to 10.70 to the US dollar; and the platinum strike

ended in mid-June after five months, although it will take a

while for the sector to recover and return production to

normal.



Russia (by Ildar Neverov, Steelway Limited Company, Board Member of the BIR Non-Ferrous Metals Division)

At the time of writing, the Russian Federation is

facing the possibility of stricter sanctions from the

EU and the USA. To date, declared measures

have not had a significant impact on Russian

business, but there are restrictions in the areas of financing

and banking.

With respect to the World Trade Organization (WTO)

agreement, Russia is scheduled to reduce its non-ferrous

scrap duties this year. It will be interesting to see whether the

Russian government fulfils its WTO undertaking in the current

circumstances.

Europe

Germany(by Ralf Schmitz, Managing Director of VDM - German Federation of Metal Traders)

Despite good economic developments, the

German metal market has been slow in picking up

momentum. Germany is in good shape and

companies generally have renewed confidence.

Industry’s order books are well-filled and many companies are

taking on workers. Only the metals sector does not appear to

have reached this more positive point. Perhaps the metals

economy is following general economic developments with a

certain delay because the 2008 crisis reached our sector later.

If that is the case, we can look forward to a definite recovery in

the metals sector.

The metals industry has sufficient orders, machinery is busy

and demand is high. The only problems are low metal prices

and high costs keeping margins at a low level. Despite good

capacity utilisation and hard work, it is proving difficult to make

money. It’s a similar story for scrap businesses, with solid

demand meeting scarce supply. Margins are continuing to

shrink while competitive pressures between companies are

increasing.

As far as prices are concerned, Germany has generally

followed the LME. Price indications at the time of writing are

as follows: bright copper wire scrap (Kabul) at € 5050-5240

per tonne; unalloyed copper wire scrap I (Kader) at € 4900-

5100; new rolled brass scrap (Magda) at € 3560-3800; pure

aluminium wire scrap (Achse) at € 1450-1610; aluminium

extrusion scrap (Alter) at € 1460-1560; soft lead scrap

(Paket) at € 1340-1460; and old zinc scrap (Zebra) at

€ 1230-1290.

Italy (by Fernando Duranti, Tzimet SPA/Titanium& Alloys SRL.)

Last month’s BIR Convention in Miami attracted a

substantial number of new South American

companies as well as the increased presence of

other members dealing in the South American

markets. Market conditions were not in helpful mood but

business negotiations and discussions were clearly taking

place all over.

Metal prices before the Convention were on the slightly

weaker side and the market was not behaving according to

expectations. The political situation in Europe had entered a

more delicate phase with the election of the new European

Parliament. Demand for scrap was gradually rising but

shortages were still being felt, while industry production was

slowly picking up and improved orders were being seen for

new products.

As June progressed, industry seemed to gather momentum

and production remained relatively steady compared to

those earlier periods when crisis prevailed and output was

weak. Then, all of a sudden, the LME started picking up and

prices of all the major metals strengthened, thus helping

both buyers and sellers to enter the market and to recover

some of the losses of the previous months.

Copper is still in high demand and hard to find on the

domestic market, although some grades can be found in

neighbouring countries.



When opportunities arise, most buyers are prepared to pay an

extra percent in order not to lose out. Premiums are both

offered and demanded on occasions in order to convince the

seller to release material. Berry and Millbery are particularly

difficult to find and premiums dominate the markets for these

grades.

Another metal to have strengthened is zinc, the price of which

has finally risen after a long period of low values but strong

demand. The price has moved up and pushed demand higher

too. Lead has mirrored zinc’s demand and price increase.

Aluminium has shed its dullness of the early part of the year,

thanks in part to the automotive industry which has finally

witnessed an improvement in sales but not to reasonable

levels or enough to cause unexpected havoc in the market. All

grades of scrap are available, some to a greater extent than

others. Nickel prices have improved, pushing up demand for

stainless and the high temperature alloys market.

By the end of July, industry will have closed for the holiday

period in most European countries, resulting in a general

shutdown among scrap yards and producers of finished

products. September might bring joy or sorrow to the industry;

the former would certainly be more welcome given the long

period of crisis which has still to come to a definitive end.

Nordic Countries (by Mogens Bach Christensen, H.J.Hansen Genvindingsindustri A/S,Denmark, Board Member of the BIR Non-Ferrous Metals Division)

July is traditionally a summer holiday month in

the Nordic countries and a quiet time for the

scrap business. This year, however, the recent

increase in LME prices seems to have had a

motivating effect on scrap sellers as the level of business

activity is relatively high for the season.

There is very high demand for the premium aluminium

qualities; indeed, some are recording the highest premiums

ever seen to the LME. Copper deductions from the LME are

relatively low for the moment and demand for copper scrap is

also quite good.

The Nordic countries are at differing stages in the economic

cycle: Norway and Sweden are well along the recovery path;

Denmark is climbing only slowly from the lows; and Finland

has been hit by a renewed risk of ending up in a protracted

economic recession. Among the Scandinavian countries,

large surpluses on the external balances and healthy public

finances are still being seen.

In Denmark, the government has continued its reform- and

growth-oriented economic policy. And the housing market is

finally showing signs of moderate improvement, although

there are still considerable regional differences.

The employment rate is rising again and domestic demand

appears set to revive itself over the coming quarters from its

slumbers of recent years. The Swedish Riksbank is under

pressure from low inflation which, since April, has turned into

deflation. Rates were cut in December last year and again

this month.

The Riksbank remains in easing mode and another rate cut

could be possible later in the year if inflation does not return

in the coming months. Domestic demand remains the key

driver of growth, and the expectation is of moderate GDP

growth for 2014. It should be noted that there is a

parliamentary election in Sweden this September. A

moderation of Norway’s economic growth is being attributed

mainly to a decline in oil investments. At the same time, the

unemployment rate has stagnated and export growth has

been increasing.

Finland remains in recession and the GDP decline of 0.4%

in January-March this year marked the eighth consecutive

quarter without growth. A new Prime Minister and Minister of

Finance have resulted from a change in two of the

government parties. The new government is trying to make

some structural changes and cuts in order to reduce the

state deficit. What this implies has yet to be determined.



Disclaimer: BIR declines any responsibility regarding the content of these pages. The reports given represent the personal opinion of their authors and have only a reference value.

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Bureau of International RecyclingNon-Ferrous Metals Division

BIR – REPRESENTING THE FUTURE LEADING RAW MATERIAL SUPPLIERS

Bureau of International Recycling (aisbl)Avenue Franklin Roosevelt 24 T. + 32 2 627 57 70 [email protected] Brussels – Belgium F. + 32 2 627 57 73 www.bir.org

Documents

Issue N° 127 – July / August 2014 - mrai.org.in · important region affect the world’s non-ferrous scrap industry. ... leading to higher levels of activity and supply from the