NEW YORK U.S. export prices for nonferrous auto shred, or zorba, have continued to spiral downward, with market participants saying that recent economic issues in China have prompted buyers to postpone shipments and reduce price quotes.
Material with 94- to 95-percent metallic content dipped to 67.5 to 69.5 cents per pound March 26, down 2 cents from March 17, while 90- to 92-percent material also fell 2 cents to 65 to 66 cents per pound in the same comparison, sources said.
Chinese aluminum smelters are being compelled to pull back on scrap purchasing largely because of reduced access to credit as well as a depreciation of the yuan caused by regulatory action in China designed to curb currency speculation, sources said.
There seems to be mounting economic pressures on the Chinese model of development, Alan Tonelson, a research fellow at the Washington-based U.S. Business and Industry Council, told AMM. Reckless lending in way too many important sectorsfrom manufacturing to real estateis obviously a big problem in China.
Industry insiders told AMM that if China continues reduce nonferrous scrap purchasing, the entire U.S. scrap industry, including ferrous and nonferrous scrap, will be affected.
This could be a real havoc-maker if China continues to cool on zorba. There are not enough domestic zorba processors to turn all the material into twitch, a scrap industry consultant said. The next 35 to 40 days will be very pivotal for the market. If I were a substantial scrap processor ... I would be very concerned. Shredders were never set up solely for the domestic market. What are they going to do now that all this material is staying stateside?
Several scrap buyers at major Chinese aluminum smelters said they were taking a wait-and-see approach and had dramatically reduced purchasing activities over the past two months.
Sure, we are still buying but the price is not aggressive, one China-based zorba buyer told AMM. I would say we are seeing 67 cents per pound for high-grade material, and we are able to buy at those levels. He added that nobody wants to buy in China except for the big players who absolutely need material. We need to keep our furnace running, but the smaller players can stand to wait this thing out.
A second exporter noted that most of the transactions being completed by Chinese importers were obligatory and done to maintain relationships with U.S. shippers. Everyone is losing money in China, from the scrapyards to the smelters, he said. Everyone is getting beaten up on margins.
Others pointed to the recent absence of one major aluminum scrap buying firm in China as a further sign of market weakness.
Until they come back into the market and are buying material in the U.S., things are going to be on very shaky ground, one exporter told AMM, adding that he had heard that procedural issues in China had forced the company to temporarily exit the North American market.