Market uncertainty, energy transition concerns focus of non-ferrous discussions at ISRI Roundtables

Conversations and panel discussions at the Institute of Scrap Recycling Industries Roundtables in Chicago on September 14-16 largely centered around market uncertainty and navigating complex geopolitical landscapes during a time of energy transition and low domestic demand

“No one knows what’s going on,” was the refrain of multiple sources, and the consensus was that there is a lack of clarity regarding current market pricing and the factors contributing to it.

One buyer said that market participants who offered specific reasons behind current market dynamics were “shooting from the hip.”

At the Copper Roundtable on September 15, John Gross, publisher of The Copper Journal, spoke about current supply/demand imbalances, saying, “Logically one would say, if we’ve got the market in a deficit position and we’ve got inventories almost nonexistent, the price should be a heck of a lot higher than it is. So why isn’t it? That’s an open-ended question and I don’t have an answer.”

Discussions also centered around metal needs for the clean transition to a low-carbon economy and its emissions targets, grid necessities for electrification efforts, and logistics constraints.

New energy markets

Gross also spoke of the global copper deficit. “Inventories have been depleted,” he said. “The shelves are empty, completely.”

“If we look at the difficulties facing the copper supply side of the equation, it is incomprehensible what has been happening,” he continued. Companies have invested, “to explore, develop, plan, and begin building mining operations. And they’ve been stopped in their practice because of legal problems, cultural problems, environmental problems.”

Gross said that the necessity for copper cannot be underestimated.

“When we step back away from the whole thing, the United States cannot have it both ways. We cannot have, we will not have, a green energy transition unless we have copper…we cannot depend on imports of copper to make this green energy conversion come true. It isn’t going to happen. Something’s got to give.”

At the Future of EV/Battery Recycling panel, Guillermo Espiga, vice president and head of Business Development at Nth Cycle, noted that following the passage of the Inflation Reduction Act, there have been cancellations of overseas battery projects, with companies planning to bring the projects to the United States instead “because they want to take advantage of…credits” now available as a part of the legislation.

Panelists also noted growing opportunities for the US market, saying China currently dominates processing capabilities and rare metals mining.

“The [market] opportunity is growing so fast in the US,” Bob Mullaney, chief executive officer of IT Asset Partners, said during the electric vehicle (EV) panel, adding that “volumes are going to go up 300-400% over the next five years.”

“We have to put technologies in place to compete…from a world-wide standpoint,” said Mullaney. “Power in the world is needed everywhere.”

Tim Strelitz, owner and president of California Metal-X, emphasized the importance of building capacity in the United States. “The problem with business coming back is whether or not we have the infrastructure to be able to handle all of it,” he said. But, he continued, “that’s a really good thing.”

Decarbonization efforts were also mentioned by panelists, as was the idea that scrap metal is inherently a lower carbon material.

But for EVs and their necessary battery materials, market participants expressed concern regarding their processing and regulation from the recycling side.

“You know the reality is, it is the wild, wild west. I mean, right now half the problem with this industry is people don’t know what to do with it when they get it,” said Mullaney, regarding battery materials.

Mullaney said that market participants “are just terrified,” of dealing with such material.

“There is a tremendous opportunity,” in the market right now, said Espiga, “and our government has realized that we have a problem.”

The need for safety regulations had been brought up during previous ISRI events, with market participants noting that the prevalence of new electronic devices, including electric scooters and other battery-operated toys, have caused “millions in damage” through lithium-ion battery fires.

“It’s a growing industry, and by the way whether we want it or not it’s coming. The reality is the government’s invested too much money into it.” Mullaney said. “We’re got to sit down and get some regulations that make sense from a safety standpoint.”

Regarding the capability for the US to handle switching to electric cars, Gross said “I don’t think there is a city in this country that has the infrastructure in place, or even in plan, to begin accommodating electric vehicles.”

Chris Greenfield, vice president of The Federal Metal Company and moderator of the Copper Roundtable, agreed and said “the entire grid needs to be built.”

Market sources also noted that while pricing has been in decline, particularly for aluminium scrap, engaging in energy transition efforts and building out fleets of EVs as promised by car manufacturers will require a certain amount of material.

Increased export demand for certain grades, such as old sheet and non-ferrous auto shred (twitch), was seen by market participants as helping support some prices, while lagging domestic demand was continuing to put downward pressure on others.

At the Aluminium Roundtable, Josephita Harry, Pan American Zinc vice president of sales, non-ferrous metals and electronics scrap, spoke of growing demand in export markets.

“There has been a demand for twitch in export throughout the year…. Demand’s always been there, it’s just prices weren’t as competitive, so more material stayed in the United States,” Harry said.

But, she continued, “there’s also a lot of smelters in different parts of Asia that weren’t buying for several months because of the volatility of the market…. So all these people have not much material left to process and run their plants, and they realize they need more material.”

“While they could buy cast and they could buy zorba…they’re also buying twitch,” she said. “[It’s easier] to process it quickly. So, they’ve come back, the demand which was always there now seems to be stronger. One, because the domestic seems to have softened a bit, and two, they realize they still need to fulfill their orders and they need more material.”

Geopolitical concerns and transportation

Sources also noted the geopolitical implications of having resources and capacity concentrated abroad, especially in China.

Gross noted the ongoing war between Russia and Ukraine and said that a conflict between Taiwan and China was possible, with underlying sentiments felt by China toward Taiwan like those felt by Russia toward Ukraine.

Such a conflict could present serious issues for the US, Gross said, because “we [the US] have a major imbalance on a global level that what happens in China, and China’s economy, will have ramifications around the world.”

“What may happen between China and Taiwan, is going to implicate the United States,” Gross added.

Strelitz emphasized the need for the US to build domestic capacity but said that “China may have reached its apex,” and that “the future is happening in North America.”

“The dislocation and the disengagement of China and the United States, from my point of view, is a very healthy movement, if we don’t end up in a place where we don’t want,” Strelitz said.

The conflict in Russia and its implications on energy usage, particularly in Europe, was also discussed.

Harry spoke of the energy needed to achieve lower carbon emissions and allow for green innovation, particularly in regards to the continuing energy crisis in Europe.

“How could we go into an energy crisis?” Harry said, “There is an energy crisis for low-carbon means of energy. If we decide to burn coal all over the world and use it for energy, we would still have plenty.”

“We have to be aware,” Harry continued, that a stance has been taken to “make aluminium in a cleaner way, relying on resources that have less emissions. And hence, we are in a crisis.”

Panelists expressed concerns that Europe will go “from bad to worse,” and that curtailments of primary capacity will continue. Increasing usage of scrap may be the next step for Europe, but the US should not become “fixated” on Europe, given growing markets across East and Southeast Asia.

Sources agreed that port congestion was easing, with panelists noting container prices are coming down. Gross said that for copper exports “a lot has to do with less imports to China.”

“We do have an ongoing issue with the containers and supply chain and logistics,” Harry said, and that for the past several months “container rates were going up, not in hundreds, but in some…as high as a few thousand. But, [freight rates] are finally beginning to stabilize, which makes the export FAS rates a little bit more stable.”

This has been helped by more container availability, and slightly improved demand year on year, according to Harry.

While the demand side of the equation, particularly for aluminium, has gone through a “shock” the past several months, panelists at the Aluminium Roundtable said that the building of three new mills in the United States will affect trade flows of scrap.

Sources specifically noted increased opportunities for twitch, zorba, and used beverage cans in the domestic market.

Other market sources, however, reported continuing issues securing container availability for products such as lead scrap batteries. Sources in recent weeks have noted continuing price decreases with a “glut” of US supply, and not enough domestic capacity to process it all.

Financing and interest rates

Panelists at both the Copper and Aluminium Roundtables noted that when interest rates have increased, the value of the dollar has gone up. And when that value has increased, commodity prices come under pressure.

Tim Strelitz said that these moves from the Fed stemmed from inflationary concerns and fear of a recession. “I think the Fed is doing what they’re doing intentionally…I think part of their ambition is to drive prices down by increasing the strength of the dollar…So, part of this is disinflationary and the great fear is maybe a recession or something a lot worse.”

Panelists also noted that difficulty in financing metal in the US, when combined with market participants’ desire to hold on to material given market volatility, may be a cause of financial concern for companies.

But, Strelitz said on a more optimistic note, “The world’s a mess right now, but mankind always seems to get through these moments.”

What to read next
US President Joe Biden will increase tariffs on Chinese imports including steel and aluminium, electric vehicles, semiconductors and advanced batteries, to counteract China’s “unfair” trading practices, he announced on Tuesday May 14
Anglo American's rejection of takeover bids by BHP has put copper firmly under the spotlight, but what challenges lie ahead for the red metal as the corporate tussle continues?
Copper fabricators in China and the wider Southeast Asian region continue to feel the pain of high copper prices on futures exchanges and a lack of new orderbooks, with some having already asked for a postponing of shipments of long-term copper cathodes, sources told Fastmarkets in the week to Wednesday May 15
This legislation emphasizes the crucial role of graphite in electrification efforts and highlights the ongoing significance of both natural and synthetic graphite in the EU's green transition journey
Standard Lithium announced on Wednesday May 8 that it was forming a partnership with the multinational energy company Equinor to accelerate the development of its South West Arkansas and East Texas lithium brine projects in the United States
Recent weeks have seen a significant number of miners agreeing sales of copper concentrate to traders for one to four years of supply, Fastmarkets has learned