As David Chiao, President of the BIR‘s non-ferrous metals division, points out in the recent BIR world mirror on non-ferrous metals: „The start of 2016 was very disappointing, but somehow expected“, which means expectations are already low. He also mentioned that, unlike many other countries, although the US economy performed well in 2015, it is already showing signs of renewed weakness. Andy Wahl of TAV Holdings calls it a roller-coaster ride, „ending fortunately on the way back up with rising oil and commodities prices“. He agrees that the start to 2016 has been weak and said „it looked like déjà vu, as markets tumbled for several days in a row. He expects a „long, rough ride in the months ahead“.
China is the country with the biggest influence on the market, as many companies have found out within the last month. Shen Dong of Omnisource Corporation explains that the Chinese government is working on reducing overproduction and overcapacity, including in the iron, steel and coal industries. It plans to set maximum production limits based on market demand. According to Dong, the government also plans on closing out-dated facilities that do not meet safety, energy consumption and environmental standards. The largest copper smelters have already agreed to cut sales by 200,000 tonnes in the first quarter of this year. Dong expects markets to be reluctant in view of current market conditions and weak demand. That view conforms with reports from Ma Hongchang a regional recycling expert. According to him, a spokesman for the general administration of customs called the trade last year „difficult and complicated“. He does not expect any changes in 2016.Mogens Bach Christensen of H.J. Hansen suspects that non-ferrous markets in the Nordic countries may still be on vacation, as low prices led to weak business in the first weeks of the year. However, the situation looks quite different from one country to the next. As Hansen points out, the Danish GDP declined in the last quarter of 2015 for the first time in two years, although this fact does not seem to have had a negative impact on the Danish economy. Sweden seems to be doing quite well and expects GDP growth for the next two years. On the other hand, Norway has still has not yet recovered, as the country is extremely dependent on the oil price. The Finnish economy has halted its economic decline, but still shows no signs of growth.
On the German market, Murat Bayram of European Metal Recycling Limited speaks of overcapacities at operational yards due to a 40-per-cent decline in scrap availability. Bayram assumes that this will lead to more shutdowns and further consolidation in the industry within Germany and although the German economy is doing quite well, there is still a shortage of scrap, particularly of good quality material. Bayram also points out that „rating agencies and credit insurance companies are evaluating raw materials sectors in general as an extremely endangered business field“.France seems to be suffering from the same problems. According to Alexandra Weibel-Natan of Manco, the country saw far higher economic growth in 2015 than in the previous year. Especially the construction and manufacturing sectors saw noticeable increases. She points to other positive signs for 2016, but also explains that „those positive signs have not yet had any beneficial impact on our industry“. Many traders are holding onto their stock in the hope of better prices. Like in Germany, the French market is also undergoing a certain degree of restructuring. According to Weibel-Natan, many small companies are disappearing from the business and she expects 2016 to be a difficult year for the industry.
The Benelux countries also seem to be suffering from negative market sentiment, as Jurgen van Gorp of Metallo-Chimique NV points out. He explains that „the first couple of weeks were tough in terms of sourcing materials“. Business in the Benelux is mainly spot-driven at the moment and like France and some other European countries, the Benelux countries are „still experiencing the aftermath of recent events in Paris“. Van Gorp claims that „this is not helping to create a positive outlook for the next couple of months“.
Nick Rose of Tandom Metallurgical Ltd. identifies „a total lack of confidence in the UK“, driven by „fears of another global slump“. According to Rose, this leaves the domestic metal industry still struggling. Prices are not only down, they have reached historic lows. The only positive aspect for British traders is the weak pound, according to Rose.
Italy is also steering towards a consolidation, especially regarding the scrap collectors. According to Leopoldo Clemente of LCD Trading, a new „Green Economy“ law requires walking recyclers to enrol with the Italian register of authorised environmental companies for collection and transportation. Clemente emphasises the importance of these recyclers for the ferrous and non-ferrous recycling industry. On the other hand, there are a number of positive signs. Clemente mentions the „strong foundations for a rich collaboration“ between Italy and Iran, following the nuclear agreement between Iran and the UN Security Council. There is also greater confidence among Italian consumers, as Clemente points out. He also states that there was „greater use of industrial plants in the fourth quarter 2015“, which could increase investment levels in 2016.Ildar Neverov of Steelway Limited reports that there are no good signs coming from Russia. Since the European Commission and Turkey have introduced anti-dumping sanctions for some metal products coming from China and Russia, it could lead to a ban on scrap exports as a response from Russia, he explains. With very high central bank interest rates and an unstable currency, Neverov states that „exportation of scrap is not a good business option these days“.
Like many other countries, India is also feeling the pressure of uncertain global markets, as Dhawal Shah from Metco Marketing explains. However, due to the high growth rate and the huge consumer base, it may be a little easier to do better for any industry. The country is awaiting the annual budget, which will be published by the end of February. Shah also points out that the government has granted a mandate to establish the first auto shredder in the country. Taking advantage of the low oil prices, the government has made some savings, which are intended for investment in infrastructure projects. According to Shah, this could lead to growing demand for steel and other metals.
Obviously, the Middle East is one of the regions that suffers from low oil prices the most. According to Ibrahim Aboura of Aboura Metals FZCO, Saudi Arabia‘s budget deficit was almost completely due to falling oil prices. However, the scrap business has not been affected so badly. „Despite slowing economies and falling commodities prices, non-ferrous markets in the Middle East have been trading healthy volumes at high levels,“ Aboura explains. Although orders from Asia have dropped, he points out, higher demand has come from India, Europe and the USA. „India remains an important market for us and will continue to play a vital role.“
The full report is available for members on www.bir.com
All persons quoted are board members of BIR‘s non-ferrous metals division, unless otherwise noted.
