BIR World Mirror on Non-Ferrous Metals - Issue March 2022: Surges and swan dives: huge price swings breed cautious approach
A concise summary of the BIR World Mirror on Non-Ferrous Metals – Issue March 2022. Full version with detailed market reports available in the Members Only section of the BIR website.
Back in early February, the first BIR Non-Ferrous Metals Mirror of 2022 warned of more hyper-volatility to come - and the markets have certainly delivered. The latest edition of this flagship publication speaks of huge gyrations in the prices of many metals, thanks in large part to developments in Ukraine and on the LME.
At least up until several days ago, some scrap yards were still operating close to the city of Lviv in the west of Ukraine but scrap inflows have been described as low to non-existent. Meanwhile, Russia’s metals industry is operating with limited import-export activity. Outbound container bookings from Russian ports are either unavailable or subject to a very limited choice of shipping lines. Belgium and the Netherlands have halted imports, exports and the transit of Russian cargoes via their territories, with the result that their major hub ports will no longer be available for transloading from feeder to ocean-going vessels.
The economic sanctions against Russia and estimates of resulting material deficits have helped to fuel steep surges and swan dives on the LME, as well as the suspension of its nickel contract. These developments have sparked questions over the continuing relevance of the Exchange to those engaged in physical markets. Another response has been greater caution in trading activity across the metals complex: many market players have been trying to conduct business on a deal-by-deal basis rather than adopting traditional pricing models.
Even aluminium, which has displayed more limited volatility in the recent past, has recorded 20% swings in value within a few days. The Midwest aluminium premium has climbed more than 15% since the previous Mirror in February on the back of increased freight charges owing to higher fuel costs and lack of capacity.
To complicate an already-complex picture, COVID infections in the leading market of China have exceeded previous levels, fuelling fears of further disarray in supply chains and of a more laboured global economic recovery. Massive delays at China’s main container ports have resulted in many vessels being re-routed to Singapore, Malaysia, Indonesia and the Philippines, leading to further congestion at those ports too.
Malaysia’s new import rules are also having a trading impact: for example, Japan’s total copper scrap exports in January fell below 20,000 tonnes for the first time since 2019, largely as a result of a slump in deliveries to Malaysia; and US exporters are seeing more limited shipments of secondary aluminium to Malaysia, with tonnages largely heading instead to Taiwan and India.
In North America itself, recent protests by truck drivers over a Canadian government mandate requiring those wanting to cross the Canada/US border to be fully vaccinated have resulted in recyclers having to pay more for freight and to finance their inventories for longer while they wait for goods to move.
According to feedback from Mexico, the worst freight scenario is not increased rates but rather that certain routes are becoming unavailable. It is pointed out that challenging shipping conditions have the ability to reshape trade routes, in which context there has been an increase in the volumes of US Twitch and Zorba finding their way into Mexico, thereby further depressing demand for old cast units.