Nonferrous Scrap, China

Copper fluctuated around $9,000 in June amid news creeping from home and abroad such as the debt problems in euro zone, economic data from China, Europe and the United States and China’s moves to cool inflation.

Being extremely sensitive to economic figures, copper fell on June 14 soon after data released that China’s CPI and PPI had jumped by 5.5 percent and 6.8 percent respectively in May year on year. But it rebounded strongly and hit its highest of that week in later trading on better-than-expected economic data from China and the United States as well as easing tensions in the market after the Chinese government announced to increase the required reserve ratio by another 0.5 percent.

However, this rally was offset one day later by a broad decline in euro, Dow Jones index and crude oil. It was not until June 28 when there was a sharp revival in LME copper as concerns about Greece’s debt default eased after the Greek parliament passed the austerity plan. And the metal’s continued sharp rally the next two days has put a perfect ending to the second quarter and fueled optimism about the coming market in July.

Compared with the futures markets in London and Shanghai, physical copper market in South China showed resistance when the prices were falling while stayed in stagflation when the prices are rising. The three most evident problems in physical copper market have been tight supply, soft demand and financial constrains, market research indicates. Most importers have been making purchases in domestic market instead of placing orders from abroad due to the strong LME copper and rising import cost. So, the supply in domestic market has further tightened on decreasing copper arrivals. And many copper processing workshops have also been suspended due to the tight supply and weak demand over summer. Meanwhile, the marketers’ purchasing power has been constrained by tightening measures coming in successions.

Insiders are bullish about the coming business in July despite the slackened sales and demand during the summer slowdown. Their confidence mainly comes from the following reasons. Firstly, sustaining tightness in supply is looked to be supportive to the copper outlook. Secondly, a pick-up in demand from China, the world’s top consumer, is expected to see in near future given that copper stock levels in both Shanghai and London warehouses have been on a steady decline. Finally, positive assessments about the copper prospects from some prominent international investment banks have also underpinned the market sentiment.

There was a fall in local aluminum ingot inventories in June as most of the smelters cut their outputs due to the power prices hike and power shortages. The trading, however, was still sluggish. For one, demand from aluminum manufacturers was slackened on the summer slowdown and power shortages. For another, holders were stubbornly persistent about their offers. But later it turns better after the aluminum prices reversed the downtrend on June 20. When the prices climbed back to the level of 17,000 yuan/ton, holders seemed to get more interested in selling. Nevertheless, downstream manufacturers still preferred to buy according to their need, which somewhat cap the advance of the rally.

With relatively lower prices and risks, zinc regained attention from the investors in June. According to market research, more buyers were seen making enquiries in the market when the prices retreated and got near to the level of 17,000 yuan/ton where was considered to be the best place to get in. On June 29, China announced to reduce the tariffs on imported zinc and zinc alloy from 3 percent to 1 percent since July 1, 2011. Though it was not looked to add significant weight on domestic zinc prices in near term, yet insiders are still worried about its effects on zinc’s long-term trend.

The continued downward shift in LME nickel cast a deep gloom over the stainless steel scrap market. The market sentiment was dampened on shrinking demand over the summer and lower offers from the steel mills and recyclers. But with LME nickel’s rebound since June 27, the market sentiment got a little better. And market participants also grew more bullish about the coming business in July.

Copyright and Exemption Declaration :¢ÙAll articles, pictures and videos that are marked with "China Aluminum Network" on this website are copyright and belong to China Aluminium Network (www.alu.com.cn). When transshipment, any media, website or individual must list the source from "China Aluminium Network (www.alu.com.cn)". We seek legal actions against anyone that disobey this. ¢ÚArticles that marked as copy from others are for transferring more information to readers, do not represent or endorse their opinions or accuracy and reliability. When other media, website or individuals copy from our website, must keep the source. Anyone that changes the articles' sources will hold the responsibilities for copyright and law problems. We also seek legal actions against anyone that disobey this. ¢ÛIf any articles copied by our website concern the copyright and other problems, please contact us within one week.