Let’s hope for a repeat performance

Welcome to Dubai. We are back in the city of

tomorrow for the first time since 2009, the year

immediately following the onset of the world

financial crisis. On that occasion, there was a

great recovery after BIR’s Dubai Convention and certainly

we hope we can repeat that performance this time round

after the long recession of 2013/14.

Since our Convention in Paris last October, we have

experienced many changes within our division: Bob Stein

stepped down from the presidency; our long-term board

member Robert Voss has retired from the industry; and a

few other board members have completed their terms or

have departed. Therefore, I’d like to take this opportunity

to express our deepest appreciation of their support and

service on which the foundations of the Non-Ferrous Metals

Division are built.

With the market having regained some strength and with the

flow of our scrap also changing, I wish you all a successful

Convention in Dubai and a safe journey.

David ChiaoUni-All Group Ltd (USA)

Interim President of the Non-Ferrous Metals Division 04 May 2015

International

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

Since the beginning of April, India has been the talking point

for the global scrap fraternity, the reason being an overnight

change in pre-shipment procedures for all metal scrap bound

for India. The Directorate General of Foreign Trade (DGFT),

which is the policy-maker and regulatory body for foreign trade, announced

on April 1 that all import cargoes of metal scrap would essentially require

the Pre-Shipment Inspection Agencies (PSIAs) to video a three- to five-

minute clip of every consignment, demonstrating the location of loading,

stage-wise stuffing, and the sealing. It also asked for the identity of the

inspector, for the registration of equipment (radioactivity detection devices)

used during the inspection and for the pre-shipment certificate signing

process to be evident. It would then be required for all this information

to be uploaded on to the DGFT’s website, along with the usual certificate

confirming the material to be within acceptable levels of radioactivity and

free from any kind of explosives.

What followed was complete pandemonium as suppliers, buyers and

PSIAs questioned the timing and the feasibility of implementing these

new procedures. Sensing an immediate stoppage of business, the Metal

Recycling Association of India (MRAI) - the apex local association of Indian

metal recyclers - swung into action and held talks with the DGFT. About a

week later, the new procedure was put in abeyance and a new draft was

provided which replaced the video evidence with photos.

While we are awaiting further news on the exact implementation of this new

draft, the MRAI has demanded a minimum of three to four months for the

trade to adapt to any new procedures, and the authorities have given a verbal

assurance to this effect. The MRAI has also asked the DGFT to consider self-

certification for those scrap exporting processors/suppliers who, by federal or

statutory requirement, have installed radioactivity detectors and have trained

personnel as well as adopted systematic procedures which comprehensively

Issue N°134 – May 2015

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Non-Ferrous Metals

World Mirror

dollar which is at historic highs in relation to the currency of its second-

largest trading partner, Australia. The New Zealand dollar is also trading at

historic highs against the Euro; this is impacting New Zealand’s export-driven

economy and could further erode exporters’ margins.

China (by Shen Dong, OmniSource Corporation, USA, Board Member of the BIR Non-Ferrous Metals Division)

It has been reported that more than 400,000 tonnes of copper

units were imported into China during March, an increase of

40% from the February figure of 280,000 tonnes which was

the lowest monthly total since mid-2011. Contributors to this

increase include the post-Lunar New Year buying mentality and the support

between the SHFE and the LME. However, the copper import total for the first

quarter was down 17% from the previous year.

Overall, the copper market in China is still somewhat bearish given the

banks’ tight credit policy and weaker demand from the domestic market.

China’s copper demand grew only 0.7% in the first quarter of 2015 and full-

year growth may ease to just 4%.

Chinese banks are reducing their lending to end-users and the tight

cash situation is impacting other non-ferrous sectors in addition to scrap

purchasing. On the aluminium scrap side, buyers are pointing to difficulties

with cash flow. The shortage of Zorba supply, the stronger US aluminium

price indications and recent softer demand in terms of volume and pricing

from ADC12 consumers are not helping China’s ADC12 producers either.

China’s manufacturing business activity showed an improvement in April.

The PMI was unchanged from March at 50.1 but up from 49.9 in February.

China’s manufacturing sector is still in its restructuring and destocking

phase, and some traditional industries are still plagued by overcapacity.

Profits at Chinese industrial enterprises dropped for the sixth consecutive

month in March, falling 0.4% year on year and raising the default risk for

corporate bonds. Inventories are climbing in response to sluggish demand.

First-quarter GDP growth in China edged down to a six-year low of 7%.

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

Japan’s stock market has remained strong and the Nikkei 225

index average climbed to a 15-year high at 20,000 points. The

policy of bold monetary easing under the “Abenomics” scheme

has been highly effective with regard to the devaluation of the

yen against the US dollar and the growth in the stock market.

On the other hand, the combined domestic vehicle production of eight major

manufacturers in the fiscal period from April 2014 to March 2015 showed

a decrease of 3.7% year on year to 9.032m units, down for the first time in

five years. The poor result reflected a drop-off in car sales in Japan owing

to the April 2014 consumption tax hike from 5% to 8% and an increase in

overseas production. In March alone, domestic production fell by 6.9% from

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ensure safety of materials. The DGFT has been very receptive to this idea and

is deliberating on a draft of eligibility criteria for approval of such suppliers.

Already juggling with a weak rupee and a sharp increase on the LME, the

DGFT has provided another adventure for India’s scrap trade. Let us hope

that we will shortly have a very clear direction and policy regarding the pre-

shipment procedures given that 70% of secondary non-ferrous production in

India depends on imported scrap as its raw material.

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

The downcycle in post-consumer scrap availability seems to be

continuing; and while availability is better for industrial scrap, it

is not free of challenges. Demand for mill grade scrap seems to

have all but disappeared as consumers prefer to watch the drop

in the Midwest premium from the sidelines. Securing orders and delivery

appointments is increasingly challenging.

Domestic demand for UBC and aluminium scrap related to secondary

aluminium remains robust but prices have stagnated and, in many cases,

have suffered a slight downward correction, thus further aggravating the

already-challenging post-consumer scrap availability situation as some yards

opt to hold on to their inventories instead of letting material go at lower prices.

The Mexican peso remains volatile against the US dollar in a range from

MX$ 14.93 to MX$ 15.55. Another ongoing challenge is the integrity of

operations and cargo transit as drug cartel-related violence flares in different

regions of the country. In a single day recently, Mexico’s second largest city

Guadalajara saw a couple of dozen road closures and several gas stations

and bank branches were set on fire. Also, an increase in incidents of theft

has been reported in and around the port of Veracruz in the Gulf of Mexico.

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

Generally speaking, conditions have improved somewhat from

earlier in the year. Metal merchants’ volumes remain steady in

Australia and New Zealand, although there is plenty of scope

for improvement. Local consumers remain active in both

countries at current levels too.

The Reserve Bank of Australia lowered the Official Cash Rate by a further

25 basis points to 2% with effect from May 6, largely in response to the

decline in commodity prices over the past year. Available information

suggests improved trends in household demand over the past six months

and stronger growth in employment within Australia. However, it is likely that

business capital expenditure in both the mining and non-mining sectors over

the coming year will remain weak while public spending is also scheduled to

be subdued. This could potentially impact on scrap generation and finished

metal product requirements.

In contrast, the Reserve Bank of New Zealand has kept the Official Cash Rate

unchanged at 3.5%. The key concern here at present is the New Zealand

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ago and the expectation has been that spending would go up as a result of

that. Automotive sales in general are short of projected targets but big truck

sales are definitively tracking better due to cheaper gas. Personal spending

has gone down along with downturns in exports. However, the strengthening

of the US dollar against the Euro has reversed.

In the week of writing this report, we are looking at a stronger Comex copper

market, returning to US$ 2.90-plus per lb. But from where has this sudden

increase come? A weaker dollar or better market factors? I would guess

the weaker dollar has led to adjustments in prices on Comex and the LME,

pushing some metals up to three-month highs. Spreads on red metals have

not changed much though on discounts for Bare Bright, Berry Candy or

Birch Cliff.

The Midwest premium on aluminium has come off almost 40% from its

highs and has UBC and other alloys tumbling in price. UBCs are now worth

less than Twitch, for example, along with the fact that the mills are booked

for the next two months. Where will we see the UBCs showing up? In Zorba

maybe? It would not be the first time this has happened.

Secondary smelters are still struggling with weak sales and pricing of

automotive ingot, and although Zorba - and hence Twitch - production has

dwindled, we are not seeing the usual price increases on Twitch based on

supply and demand. Only a few are able to sell at a premium, and most

secondary aluminium smelters have good levels of scrap and are able to

source sheet and cast at reasonable numbers along with other secondary

grades such as turnings. Zorba prices for export have gone up a tick, so the

sourcing of affordable cast and sheet may be short-lived as shredders will

shred that for better-paid Zorba pricing.

Mixed heavy metals, Zebra, are in good demand and the increase in red

metal values has helped to get better numbers.

Lead prices continue to trail well behind the highs that were seen at the end

of 2014 and some of the peak prices in January 2015.

Increased scrutiny and stricter interpretation through CCIC inspectors on

recent shipments have also led to some issues failing material according to

their standards that have long been no issue based on their quality.

Volumes all round are still limited, so selling the metal is not the issue but

rather finding it to process and upgrade for sales.

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

Business has been slow owing to the various holidays in April;

furthermore, load shedding was more frequent in April than in

previous months. There is a shortage of suitable raw material as

industry has been quiet, with the result that scrap prices have

increased dramatically and people are achieving close to export levels.

Scrap dealers are still getting their copper scrap converted into ingots and

blocks, but there is no margin in this business, and copper and brass scrap

a year earlier to 829,000 units, thus completing nine consecutive months

of negative growth. Japanese secondary aluminium alloy shipments also

declined in March - by 8.4% year on year to 68,600 tons.

The domestic price of ADC12 aluminium alloy has remained unchanged

in Japan, but Chinese secondary smelters raised ADC12 offers to the

Japanese market by US$ 30-40 per ton in April because of the higher cost

of Zorba imported from the USA and Europe. Meanwhile, the Japanese spot

premium for primary aluminium has fallen to US$ 240-250 per ton over the

past two months after the premium for the second quarter was settled at

US$ 380 per ton in the middle of March.

Middle East (by Ibrahim Aboura, Aboura Metals FZCO, Jordan,Board Member of the BIR Non-Ferrous Metals Division)

The first month of the second quarter ended on a stronger, positive

note with a jump in LME prices, with copper reaching US$ 6400 per

tonne and aluminium US$ 1900 mainly due to a weaker US dollar

in relation to the Euro.

In the Middle East, markets were stable in April and there was a steady supply

of non-ferrous scrap. There was particular growth in the volume of scrap from

the Gulf Cooperation Council area as LME base metal prices remained stable

following the above-mentioned increase while ongoing infrastructure projects

in the region - including preparations for the football World Cup in Qatar in

2022, the 2020 Expo in Dubai and other projects in Saudi Arabia - continue

to boost supply.

Non-ferrous exports to India were disrupted and, in some cases, put on hold

last month owing to the abrupt implementation of new inspection regulations

on imported scrap material, which caused a panic in the market. Owing to the

market reaction, the regulations were postponed twice; new regulations and

amendments are still to be set and clarified, leaving traders and the markets in

a frenzy as they wait for clear news and for efficient laws to be implemented.

The collaborative efforts of industry organisations - including the BIR, the

Bureau of Middle East Recycling (BMR) and the Metal Recycling Association

of India (MRAI) - helped apply the necessary pressure to have the proposed

regulations lifted and the implementation of new ones put on hold.

We look forward to welcoming the return of the BIR to Dubai in mid-May. In

hosting the BIR’s latest Convention, this marks the growing importance of the

region to the development of the non-ferrous and recycling industries globally.

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

The unemployment rate is at 5.5% but we seem to have stalled

on GDP growth for the first quarter, which was merely 0.2%

compared to 5% and 2.2% in, respectively, the third and fourth

quarters of 2014.

The national average for gasoline prices is more than US$ 1 down on a year

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is still being exported with or without permits. The present International Trade

Administration Commission (ITAC) system is not working and further meetings

involving all role players are required in order to find a common goal.

The new BBEEE empowerment codes are causing headaches for many firms

as these will affect them doing business with government and state-owned

companies.

The local currency has been trading at between Rand 11.85 and 12.30 to

the US dollar, with the exchange rate standing at Rand 11.90 at the time of

writing. The Fitch ratings agency has listed South Africa among those emerging

markets vulnerable to eventual US monetary tightening given its reliance on

portfolio inflows to plug a persistently high current account deficit, and the

rand fell as much as 1.6% against the US dollar. Meanwhile, recent looting and

violence against foreign nationals is expected to affect growth in South Africa.

Europe

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

Domestically, it has been very quiet over the past few weeks - a

situation which has surprised many of the recyclers involved in

supplying scrap to consumers, many of whom appear to have

slowed their purchases.

While copper was weakening on the LME, demand for scrap followed the

market. Even at lower prices, there was no indication of a revival of interest

among consumers in covering their needs given previous signs of possibly

strong increases in the prices of the various metals.

The only two metals to attract more interest were lead and zinc, which

maintained their strength. The galvanising industry is doing very well and

so is the automotive sector, with car sales having achieved record levels in

April, with growth of 24% even surprising the industry itself given that, until

recently, it had suffered from very low sales - especially during the winter

months when these reached minus levels. Despite strong demand from the

automotive industry, aluminium prices and sales of scrap have not been as

invigorated as the scrap industry had expected, leaving recyclers to accept

only very limited price increases.

The stainless steel market has been relatively quiet and has not been led by

the price of nickel, which did not react to any of the provisional increases in

the prices for the other metals.

France (by Alexandra Weibel-Natan, Manco,Representative of the Young Traders Group)

There has been no big change in France’s macro-economy

since our previous review but the general mood seems to

have improved slightly with the onset of spring. Household

consumption is a little better, but business expenditure remains

very low despite good financial conditions. In absolute figures, employment

is increasing - but unemployment is also continuing to rise as the available

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workforce is still growing significantly. Industry is still being supported by

very low oil prices and so growth should pick up in the second half of the

year and in 2016.

Base metal prices were quite stable for most of April but, surprisingly, started

to improve in the latter days of the month and in early May, mainly for copper

and aluminium. There is no apparent reason for this as the fundamentals

have worsened, with demand low and stocks increasing. Despite the LME

price rally in recent weeks, conditions for the scrap industry remain slack.

Supply is still there but demand is very low, especially in Europe and China.

Fortunately, exports continue to be supported by exchange rates.

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

Currently, there is quite good demand from German buyers

for both primary and secondary aluminium. However, during

the last couple of months, the strong US dollar has supported

the export of secondary aluminium to India and China. For

copper, it seems that demand in Germany has weakened somewhat; LME

deductions are higher than seen during recent years and some buyers

are asking for postponed deliveries. For stainless steel, German demand

increased during March and April.

In 2015, the German economy - Europe’s biggest - is expected to grow

faster than in recent years at some 2.1%, thereby boosting the continent’s

fragile economy. The combination of weaker oil prices and rising wages is

strengthening private consumption in Germany.

Over the past two months, the economic situation in Denmark has started

to settle down. The Danish krone has weakened relatively sharply against

the Euro, with the exchange rate moving close to an all-time high since

the introduction of the Euro. Market expectations are that Denmark’s

Nationalbank will adopt a wait-and-see stance based on the assumption

that the krone will firm again in the very near future, and so there will be

no intervention from the bank in the short term.

The Swedish economy is doing better than fine, mainly driven by growth

in private consumption. Employment growth is strong and house prices

are booming. There are still some question marks on the export side,

but given the recent increase in optimism within the Eurozone, there

should be an improvement around the corner. Underlying inflation is also

trending the right way and the Riksbank noted in a recent speech that the

monetary policy appears to be working.

The first signs are emerging of the impact of lower oil prices on the

Norwegian economy - in the form of lower demand from oil companies.

The number of registered unemployed jumped at the start of May

and the Norges Bank is forecasting that growth in oil business-related

unemployment will be increasing in the next quarter. Combined with

reduced purchasing power caused by lower real wage growth, this is

fuelling expectations of a rate cut.

The Finnish economy is still struggling. From Finland’s point of view, it

is essential how the Euro performs against the currencies of its most

importing scrap handling equipment makes no economic sense these days.

The sanctions imposed on Russia are not having too much of a negative

effect. There is a policy of import substitution among various industries

whereby key partnerships with the EU and the USA, for example, have been

switched to partners in the BRICS nations or elsewhere in Asia. However,

there has been an effect on European equipment suppliers as well as on

consumers of natural resources and semi-finished products from Russia.

Of course, the Russian government can look to go too far in terms of bans

and restrictions, and one of the latest examples is the attempt to restrict scrap

exports for the benefit of local consumers. After a series of consultations

with BIR Ambassadors and in line with World Trade Organization obligations,

Russia will not impose any ban on scrap exports as this would be unnecessary

and inefficient.

important export destinations, and lately it has depreciated against

the US dollar, the UK pound and the Chinese yuan. In contrast, it has

appreciated against the Swedish krona and especially the Russian ruble.

Russia (by Ildar Neverov, Tyor Group, Board Member of the BIR Non-Ferrous Metals Division)

Export bans and currency exchange rates are the main topics

of discussion at present for scrap professionals in Russia. The

ruble has twice been devalued against the US dollar since

September last year. This has been of great benefit for exporters

and has also significantly influenced domestic prices for non-ferrous scrap,

so collections were steady during the cold winter months. On the other hand,

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BIR declines all 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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BIR World Mirror: Non-Ferrous Metals May 2015

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