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LONDON (Scrap Monster): On Friday, the latest fiscal pact agreed to by a majority of European leaders didn’t exactly set markets on fire but the initial reaction seemed positive at least. Cooler than expected Chinese inflation figures and the continuing contraction in the U.S. trade deficit also provided some support. In London, Reuters reports that most official LME 3-mo. base metal prices were somewhat firmer this morning with asking prices for copper at $7,826/mt, aluminum at $2,069/mt, lead at $2,110/mt and nickel at $18,330/mt.

In New York, COMEX March copper was up around 7 cts to nearly $3.57/lb. this afternoon while oil and gold firmed above $99/bbl and $1,715/to, respectively. Stocks advanced as well, with the Dow Industrials tracking 1.5% higher following gains in the major European indexes as the Euro strengthened above $1.33.

There was good news and not so good economic news in Europe this week as the European Central
Bank cut interest rates to 1% while extending bank financing offers out to 3 years and simultaneously easing collateral requirements.

At the same time, ECB President Mario Draghi reportedly backed away from earlier statements about the level of support the central bank is likely to provide in the near future. And it wasn’t exactly clear that today’s announcement of a new fiscal pact agreed to by all members of the Euro zone would be sufficient evidence of closer fiscal cooperation so as to allow for greater ECB involvement. Also in the not so good news category would be Moody’s downgrade of 3 major French banks and the sharp reduction in the Bundesbank’s forecast for Germany’s economic growth in 2012 from 1.8% previously to just 0.6% now.

Somewhat more encouraging was the inflation news out of China, which shows that consumer prices advanced less than expected in November year-on-year (+4.2%) and declined -0.2% month-on-month.

As Goldman Sachs explains in a recent note, “{t}he fall in November CPI and PPI inflation… tends to leave more room for policy makers to loosen policy even further. Note the latest level of yoy CPI now is just slightly higher than it was when the government announced the aggressive Rmb4 trillion stimulus package in November 2008.” Meanwhile, Bloomberg was reporting this morning that China’s central bank is in the process of setting up a $300 billion fund for overseas investment.

And last but certainly not least was the positive economic news out of the U.S. which shows:

--Initial unemployment claims dropped to 381,000 – reportedly the lowest level since February

--The Univ. of Michigan/Reuters preliminary Dec reading on consumer confidence increased to 67.7

--Wholesale inventories increased 1.6% in October, and

--The U.S. trade deficit narrowed to $43.5 billion in October.

Figures released by the Commerce Department this morning show that the value of total U.S. scrap
exports decreased from $3.6 billion in September to $3.2 billion in October. However, for the year-to-date (Jan-Oct), the value of total U.S. scrap exports is up 38% to nearly $33.2 billion, already surpassing last year’s record total of $29.6 billion. By major commodity group, cumulative ferrous scrap exports jumped 47% to $8.9 billion, copper scrap shipments increased 49% to $4.2 billion, aluminum scrap exports (including UBCs and RSI) valued at $3.4 billion were 32% higher, while recovered paper shipments advanced over 17% to nearly 3.2 billion and plastic scrap exports improved 15% to $885 million.

Ferrous…
The trade figures confirm that overseas demand for ferrous scrap cooled in October as scrap prices started to ease. Lighter loadings for Turkey, India and Taiwan more than offset improved demand from China and Vietnam as U.S. ferrous scrap exports fell in volume from 2.0 million mt in Sep to 1.75 million mt in Oct, while dropping in value from $905 million to $781 million.

As for this week, market reports continued to indicate that ferrous scrap prices are on the rise. At the
more conservative end of the scale, Scrap Price Bulletin was showing higher composite prices for No. 1 HMS and shredded early in the week at $375.83/gt and $415.17/gt, respectively. By week’s end, The Steel Index raised its shredded reference price by $16/ton to $444/lt del Midwest citing improving exports, rising steel output & prices and reduced scrap collection levels.

AISI did report that domestic raw steel production increased to 1.857 million net tons for the week ending December 3, 2011, up 2.3% from the previous week as capacity utilization improved to 74.9%. And following similar moves by Nucor and AK Steel, AMM reports today that RG Steel raised their sheet prices by $40/ton effective immediately. For their part, Platts raised their midpoint HRC price by $10/ton late this week to $670/st ex-works Indiana.

Of note, China’s crude steel production reportedly dropped 8.8% month-on-month in November to 49.9 million metric tons, the lowest output in 13 months.

Nonferrous…
U.S. copper and copper alloy scrap exports decreased for the second consecutive month in October according to the latest Commerce Department figures. By value, copper scrap shipments were off by $44 million to $371 million, while by volume they were down nearly 10,000 mt to 94,000 mt in October, with China accounting for nearly all of the decline.


While domestic scrap market activity often slow down at this time of year, reports this week indicate that nonferrous scrap prices remain firm going into the holiday season. Platts this week was reporting burnt No. 1 at 24 cents under March COMEX (from 26 cents under last week), Bare Bright at 8 cents under (from 9 cents last week) and No. 2 at 38 cents under (unchanged). Secondary aluminum prices were also reportedly steady to firmer this week, with sheet and cast indicated in the upper 60 to low 70 cent range, siding mostly in the high 60’s and MLC in the low to mid 70’s.

U.S. copper and copper alloy scrap exports decreased for the second consecutive month in October
according to the latest Commerce Department figures. By value, copper scrap shipments were off by $44 million to $371 million, while by volume they were down nearly 10,000 mt to 94,000 mt in October, with China accounting for nearly all of the decline.

Late in the day today Reuters was reporting LME 3-mo. aluminum around $2,071/mt, 3-mo. Aluminum alloy at $1,960/mt and 3-mo. NASAAC at $2,180/mt. In a report earlier this week, Goldman Sachs indicated they see limited downside for aluminum prices based in part on Chinese production costs and are “mildly bullish” looking into 2012, with LME 3-mo. aluminum forecast to average $2,365/mt in 2012.

RISI reports this week that Moody’s has lowered its outlook for the global paper and forest products
industry from stable to negative in its recent report “Global Paper and Forest Products: Operating Income Will Decline as Demand, Pricing Weaken.” Weak demand in the U.S. and Europe and expected inventory increases in China as new supply outstrips demand were cited as negative features.

Recovered Paper and Fiber…
Also this week, Pulp & Paper Week reported continued weakness in U.S. recovered paper prices, with New York prices for OCC (11) down another $15 to $110-$120/st, ONP deink quality (8) off $5 to $80-$95/st, and Old Magazines (10) down $10 per ton to $90-$100/st, all basis FOB seller’s dock. Of note, the Census Bureau figures released today show that recovered paper exports in October actually increased 5% in value to $320 million and 3% by volume to over 1.9 million short tons for the month. As indicated, we’ll have more detailed trade info in next week’s report.