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Feature: ISRI convention puts a spotlight on the south

Following a tumultuous 2004 and early 2005 for ferrous and non-ferrous metals, the remainder of this year is likely to yield more sobering market conditions.

This was the consensus of many of the experts addressing the commodity Spotlight sessions at the US Institute of Scrap Recycling Industries’ (ISRI) 2005 Convention and Exposition held earlier this month in New Orleans. Indeed, it was argued that most metals have already reached their price peaks and are likely to trend downwards in the near to medium term.

Steel, for example, had made “unprecedented” gains over the last year or so “but prices will fall sharply from the second half of 2005”, delegates were warned by James May, managing director of Toronto-based May Commodity Associates. His forecast was based on evidence of over-supply conditions in mature world markets, with the exception of Japan; and the likelihood of a slow-down in China, leading to a reduction in the country’s net imports.

Given that there had been no signs of a significant supplier response to these changing market conditions, he ventured that “international hot rolled coil will decline to US$500 per tonne — from levels of around US$650 per tonne now — by the end of the year”. And he warned: “The steel industry will try very hard to push down prices for their raw materials.”

China remained the “gorilla” in the world steel market despite last year’s attempts by the government to cool down the domestic economy. And while year-on-year fixed asset investment levels in the country had dropped from around 50% to nearer 20% in the first two months of 2005, “the economy is still growing too fast” and predictions were still for finished steel apparent consumption growth of 11.5% in China this year.

Another speaker at the Spotlight on Ferrous session in New Orleans was more optimistic about near-term price prospects. Keith Busse, president and chief executive officer of US producer Steel Dynamics, acknowledged that prices had dropped from a September 2004 peak of US$750 per tonne to nearer US$600 per tonne, but he added: “I think the market has reached its bottom. It is still a fairly good market.”

The presentation from Fred Nijkerk, ferrous market editor of the Netherlands-based Recycling International magazine, identified reasons why North Americans exported relatively small volumes of scrap to Europe. He estimated that less than 5% of ISRI members were selling regularly into the EU market, partly because of language barriers and the different regulations operating in the 25 member countries.

The Spotlight on Nickel/Stainless session was reminded by Remco Devilee that nickel had peaked at US$ 17,700 per tonne early last year. The speaker, who is a market analyst with Austria-based Steel & Metals Market Research, suggested the price average was likely to be US$13,500-14,000 per tonne for 2005, US$ 2,500 per tonne for 2006 and possibly below US$10,000 for 2007-08.

According to Devilee, capacity expansion in China and growth in the production of low-nickel content 200 series stainless steel could “spoil the party” for nickel. Stainless steel production could be expected to grow by around 4% per annum from 24.4m tonnes in 2004 to some 31m tonnes by 2010; but over the same period, the scrap ratio was likely to drop from 34.8% to nearer 32%, the speaker warned. And he added: “In 2004, a 10% increase in stainless steel

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