Purchasing

Robert J. (Bob) Garino

ISRI Spotlight speakers are bullish on prices
April 18, 2008

This second quarter looks especially firm on pricing to Barclays Capital (and others)…as they see it, refined copper supply looks tight resulting in inventories returning to all-time lows and prices testing all-time highs…as an average for the second quarter, the firm is forecasting a $3.54/lb LME cash average…last week Citigroup upped its 2008 copper forecast average to $3.56...for 2009, they’re calling for a $3.50 average...

This bullish theme was also apparent at last week’s Copper Spotlight during the Institute of Scrap Recycling Industries’ convention in Las Vegas…speaker Patricia Mohr, Scotiabank Group, offered fundamental evidence that supported her $3.50 average for this year along with a potential for copper to surpass the $4.00 mark as hedge funds add to their respective long positions…speakers Marc Natan, Salam Shariff, and John Chen also stressed the supply side for refined copper as a principal price driver...

LME cash aluminum was forecast to average $1.26 this year, according to Edgardo Gelsomino, Metal Bulletin Research, at ISRI’s Aluminum Spotlight program. Other presenters that focused on aluminum scrap fundamentals included Denny Luma, Superior Aluminum, and Norberto Vidana, NEMAK.

Nickel, stainless steel, and cobalt markets were given special attention at ISRI’s Nickel/Stainless Steel Spotlight by invited speakers Vanessa Davidson, CRU Group; Philip Rosenberg, Keywell, and Derek Benham, BenMet.

Davidson’s analysis concluded with a global nickel market that she said trending towards a “small” surplus of around 16,000 metric tons this year, thus suggesting that nickel stocks “will remain high.” As for a price forecast, LME cash nickel is expected to average $13.91/lb in ‘08 with the potential for a range next year of $14.80 and $18.00 before a growing supply surplus forces prices “sharply” lower by 2010.

Benham did not offer a cobalt price forecast but noted that the global market would likely post a modest supply shortfall this year of some 38,000 metric tons based on continued positive demand that has reduced the surplus recorded in 2007. Supply, he said, was likely to increase in the near term as several new projects come on stream. Consequently, cobalt prices are expected to experience downward pressure over the
next 12 to 18 months.

Finally, ISRI’s Lead/Zinc Spotlight featured a look at the business of lead fabricated products by Don Fleming, Mayco Industries, as well as the global fundamentals of these two geologically connected base metals by Eric Klenz, KeyBanc Capital Markets, and Huw Roberts, CHR Metals. Both Klenz and Roberts agreed that rising zinc mine supply was a key factor going forward but that China will remain a wild card influencing the overall supply/demand balance. Both speakers, however, expect to see a relatively small zinc surplus this year.

Roberts is forecasting zinc to average $1.13/lb this year. His lead forecast for this year placed the LME at $1.10 as an average price, again stressing that China will have a major influence on prices with much dependent on China’s tax policy and its subsequent effect on lead and zinc exports to the West.

ISRI Ferrous Spotlight speakers Aldo Mazzaferro, Scott Newell, Jeremy Sutcliffe and John Harris addressed the domestic and international steel markets along with the root causes of the higher prices we’re seeing for both finished steel and scrap – both here and abroad. The consensus among the presenters was for a “stronger for longer” scenario based on continued higher global steel consumption, positive demand for U.S. based scrap supply, domestic steelmaking capacity constraints, and a shrinking pool of domestic obsolete material thereby resulting in this bullish near term outlook.

Note: You’ll find far more comprehensive coverage of the Las Vegas Convention Spotlight sessions in our May/June issue of Scrap magazine.

Posted by Robert J. (Bob) Garino on April 18, 2008 | Comments (0)