SALZBURG, Austria Defaults among European consumers of secondary aluminum scrap are expected to rise in 2013 as liquidity decreases and demand for end-user products falls.
The issue is not limited to countries hit hardest by the debt crisissuch as Italy and Spainas it has already begun to affect countries in Eastern Europe and the Commonwealth of Independent States, sources said.
In Ukraine, for example, the scrap and secondary metal industry has been saddled with a temporary export ban following a change of administration.
"Some of the companies really have very big problems. As of the second half of December, they will go on an extended holiday," said Karol Liptak, owner of Koice, Slovakia-based trading company Steelinvest sro, on the sidelines of AMM sister publication Metal Bulletins 20th International Recycled Aluminium Conference in Salzburg. "This is exceptional. Last year, they were working right up until Christmas," he added.
Eastern Europe has traditionally been viewed as the "workshop of the West," Liptak said, as labor is cheap and the tax environment is relatively favorable, attracting players such as Paris-based car manufacturer PSA Peugeot Citroën.
However, there are now thousands of overdue payments in the region, as well as in the western part of the continent, Liptak said, and margins have become extremely tight as a result.
"We have to be very careful with money. To sell is easy, but to collect the money is another story. Were getting more and more defaults, and weve grown into this situation throughout 2012," he said. "We started quite wellthe first quarter was alright, the second quarter was alrightbut then the third quarter was a bit worse and the fourth quarter has been catastrophic."
The outlook for next year is not encouraging, according to Liptak, and there are very few reasons to be cheerful.
"Even Germany, which is the leading European industrial country, has reported zero-percent growth for the third quarter," he said.
"There is huge uncertainty in Europe because of the financial problems in Greece and elsewhere. The Chinese and the Japanese are afraid of Europe as well, in case the situation gets any worse."
Closures and production cutbacks are inevitable, he said, and Steelinvest itself is looking at a 25-percent drop in activity.
"We are very positive about East Asia, however, especially Thailand. The Thai market has demand for aluminum and for secondary aluminumits very high," Liptak added. "We have sales there and we want to keep them growing. ... From my point of view, there are no opportunities other than East Asia."
A version of this article was first published by AMM sister publication Metal Bulletin.