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For the week ending Friday, February 10th

Commodity prices see-sawed this week as a relatively light week on the economic data front ensured that Greece’s shifting economic fortunes retained center stage. In London, LME official 3-mo. copper dipped to $8,362/mt on Tuesday morning but firmed back above $8,700/mt in the second half of the week as expectations for a second Greek bailout and debt restructuring brightened. Aluminum prices were more range-bound, with LME official 3-mo aluminum holding up at $2,277/mt on Wednesday and Thursday.

In New York, commodities mostly trended upward through Thursday, with NYMEX crude oil for March delivery trading over $100/bbl intra-day on Thursday as gold futures briefly touched $1,755/to, before both lost steam on Friday. On Wall Street, the Dow Industrials started the week in negative territory, closing down at 12,845.13 on Monday before posting three successive days of gains to finish at 12,890.46 yesterday ahead of today’s announcements on trade and consumer sentiment.

On Friday, commodity and equity markets pulled back in response to concerns about the proposed Greek bailout plan and accompanying reports of unrest in Athens. Trade balance and consumer sentiment numbers that came in below expectations didn’t help matters either. In London, Reuters reported weaker LME official 3-mo. nonferrous prices this morning, including for copper ($8,606/mt), aluminum ($2,258.50/mt), lead ($2,195/mt) and zinc ($2,124/mt). In New York, COMEX March copper plunged by around 12 cents per pound in early afternoon trading to $3.86/lb., erasing gains from earlier in the week, while oil and gold prices dropped below $99/bbl and $1,725/to, respectively. Stocks on Wall Street also retreated, with the Dow Industrials down 1% this afternoon as the Euro weakened to $1.318.

Macro news… 
As indicated, a light week on the economic calendar in the U.S. this week. The drop in initial unemployment claims for the week ending Feb 4 to 358,000 was largely seen as consistent with the recently improving U.S. employment numbers. However, the initial University of Michigan/Thomson Reuters consumer sentiment index for February dropped to 72.5, down from 75.0 in January. Also this morning, the Commerce Department reported that the U.S. trade deficit in December widened to $48.8 billion as rising imported oil prices and vehicle imports reportedly took a toll. For the full year, Commerce figures show the trade deficit expanded 11.6% to $558 billion, despite exports rising to over $2.1 billion: 

As the trade deficit with China widened to a record $295 billion in 2011, new figures from China show that their trade surplus expanded in January to reach $27 billion for the month as imports plunged 15%, according to Dow Jones reports. So not fantastic news on the trade balance front, that is, until you look at the balance on trade in scrap. 

U.S. Scrap Exports Set New Record in 2011!
The 2011 full year trade data released this morning confirm that total U.S. scrap export sales hit a new record in 2011 to reach $39.2 billion, a 32% increase from the 2010 total of $29.6 billion. And while U.S. scrap imports also increased (to $6.55 billion), the positive contribution of scrap exports to our balance of trade last year jumped to an estimated $32.7 billion. By volume, scrap exports also increased, rising by 14% to an estimated 51.7 million mt. By destination, the largest overseas customers last year included China ($11.5 billion), the EU-27 ($4.5 billion), Canada ($3.7 billion), Turkey ($2.4 billion), South Korea ($2.1 billion) and Taiwan ($1.9 billion). We’ll take a closer look at the breakdown by commodity in next week’s Friday Report. For now, here’s the recent trend in the value of total U.S. scrap exports:

Ferrous…
Despite circulating reports of rising Turkish buying interest, most sources indicated a continued softening in U.S. ferrous scrap prices this week. Early in the week, Scrap Price Bulletin dropped its composite prices for No. 1 HMS to $404.17/gt (from $432.50/gt) and for shredded to $442.50/gt (from $467.17/gt last week). Late in the week, The Steel Index again lowered its reference price for shredded, this week by $7 to $439/lt delivered Midwest. Of note, AMM reported this week that the restart of RG Steel’s blast furnace at Sparrows Point was supporting regional scrap prices, with shredded in the Philadelphia region put at around $445/ton.

For the week ending February 4, the American Iron and Steel Institute estimates that domestic raw steel production edged 0.5% higher week-on-week and was up nearly 7% year-on-year to reach 1.907 million net tons, as the capacity utilization rate improved to 77.2%. Late this week Platts was listing a slightly lower midpoint price for hot rolled coil at $737.50/st ex-works Indiana. Here’s a look at how HRC and Busheling prices have behaved recently, including the uptick at the beginning of the year:

Nonferrous…

Nonferrous prices lacked direction for much of the week and ended the week with a thud as Reuters reports that LME 3-mo. copper fell below $8,500/mt and LME 3-mo. aluminum was down around $2,251/mt late in the day Friday. On the supply side, the International Copper Study Group released its latest production capacity data this week that shows average annual copper mine capacity growing 6.6% between 2011 and 2015 to reach a total of nearly 26.2 million mt in 2015. For global copper refineries, average annual growth is pegged at a more modest 4.1% over the same time period to approach 28.9 million mt. On a related note Macquarie reports that Southern Copper has pushed back its expected start date for its Tia Maria copper project in Peru from 2013 to 2015.

On the demand side, our friends at Fastmarkets.com report that Chinese copper imports in January came in at 413,964 tons, down nearly 95,000 tons from the December total but up 13.6% year-on-year. Credit the Lunar New Year celebrations for much of the drop.

Following a difficult fiscal 3rd quarter, press reports indicate that Novelis is looking for better aluminum market conditions in the current quarter on improving demand in Europe, South American and Asia. Secondary aluminum prices were reportedly little changed this week, with old sheet and cast indicated mostly in the low to mid 70’s, siding in a similar range, and MLC in the upper 70’s. Copper scrap spreads reportedly moved out a little, with Platts indicating Bare Bright at 10 cents under COMEX, burnt No. 1 at 26 cents under and No. 2 at 45 cents under. March COMEX was last indicated at $3.848 late on Friday.

Here’s how LME nonferrous stocks were looking late in the week: 

Recovered Paper and Fiber…
Recovered paper prices ended 2011 on a weak note but industry reports have mostly indicated that prices stabilized early this year. The latest report from RISI’s PPI Pulp and Paper Week seems to confirm that trend. February prices for OCC #11 are reportedly up by $5-$30/ton, including a $30 jump in New York to $130-$150/st FOB seller’s dock. In addition, prices for ONP deink quality (#8) are reportedly steady to up $10/ton this month to a range of $80-$95/ton in New York and $125-$135/ton in California. 

This Week’s Quote: “Older people shouldn't eat health food, they need all the preservatives they can get.” -- Robert Orben

This Week’s Advice: Five secrets of a perfect relationship:

1. It's important to have a partner who helps at home, who can cook, cleans up and has a job.

2. It's important to have a partner who can make you laugh.

3. It's important to have a partner who you can trust and who doesn't lie to you.

4. It's important to have a partner who is affectionate and who likes to be with you.

5. It's very, very important that these four partners never, ever meet each other…