Pittsburg 06/10/2016 - AMM - Brad MacAulay
Lead and zinc scrap prices have risen amid dramatic gains in primary metals on the London Metal Exchange, offset slightly by softer consumer demand, mounting inventories and weaker order books.
“We’re not that busy, so we don’t need a substantial volume of scrap,” one lead scrap consumer source said, noting that scrap inventories are currently strong. “Typically, October is a busy month, especially because it’s long with 31 days, but the absence of physical business is a concern.”
Year-end accounting is factoring into consumers' muted appetites, a supplier source said. “Domestic consumers are trying to work down inventories for the end of the year, and it just so happens that LME lead has been going higher. They [consumers] will now have to pay to fill their needs, so no one is really aggressive.”
“It seems to me that smelters have plenty of material with primary lead prices where they’re at,” another supplier source said.
Some consumers agreed. “We have six weeks of material on the ground, so on the front end we’re really not looking [for] material,” a second consumer source said.
“Supply is very steady at the moment; maybe the slightest of increase in price as we are backfilling some inventory, but our numbers are stable,” another consumer source said.
Smelters’ lead scrap prices jumped $2 per hundredweight virtually across the board on October 4. Whole batteries were the exception, moving up $1 on the low end of the range to $33 to $34 per cwt, according to Metal Bulletin sister publication AMM’s latest assessment.
The three-month lead contract closed the LME's official session on October 4 at $2,102 per tonne (95.3 cents per lb), up 7.3% from $1,959.50 per tonne (88.9 cents per lb) two weeks earlier. However, the contract eased down 1.8% to $2,064 per tonne (93.6 cents per lb) on October 5.
Zinc scrap prices also received a boost from substantial gains on the LME, according to market participants. New zinc clippings, old zinc and galvanizers' dross were all up $1 per cwt on October 4, according to AMM's assessment.
The three-month zinc contract closed the LME's official session on October 4 at $2,402.50 per tonne ($1.09 per lb), up 5.1% from $2,287 per tonne ($1.04 per lb) two weeks earlier, but the contract retreated 1.4% on October 5 to $2,370 per tonne ($1.08 per lb).
Meanwhile, some market sources remain concerned that overall scrap volumes will continue to come under pressure due to recent ferrous scrap price declines and a subsequent slowdown in collection rates.
“[Terminal market prices] have come up nicely, but overall scrap is tight. There’s just not a lot out there, and a lot of non-ferrous is driven by ferrous. With steel prices down, we’re seeing dealers with less material,” the first supplier source said.