(Updates price in 10th paragraph.)
Jan. 28 (Bloomberg) -- Aurubis AG is joining researchers CRU and Wood Mackenzie Ltd. in reporting higher scrap supplies this year as more old cars, washing machines and factory waste become available with economic growth rebounding.
The flow of scrap in Europe increased in the first few weeks this year, Hamburg-based Aurubis, Europe’s biggest copper refiner, said in a report yesterday. Recycling by copper producers and fabricators will rise 1.8 percent to 10.29 million metric tons after falling the most since 2009 last year, according to data from Edinburgh-based Wood Mackenzie. Global economic growth will accelerate by 3.7 percent this year as Europe emerges from recession and the U.S. expands, the International Monetary Fund estimates.
“Everyone is feeling we have finally got to the bottom,” said Nigel O’Gorman, a scrap trader at F.J. Church & Sons Ltd. in Rainham, England. “The general opinion seems to be we have hit the bottom and the logic is we should be seeing more scrap. Things are going to pick up. How fast and which areas, that’s a different story.”
Aurubis, the world’s second-biggest copper producer, recycles about 400,000 tons of the metal each year. A global shortage of scrap, which is used as feed for refined-metal producers or an alternative raw material by fabricators, helped narrow the surplus last year, according to Deutsche Bank AG. Refined output will exceed demand by 320,000 tons this year, after a surplus of 110,000 tons in 2013, the bank forecasts.
Copper-scrap processing fell 1.7 percent to 10.1 million tons in 2013, according to Wood Mackenzie, as slowing growth led to less waste from consumers and factories. CRU, based in London, forecast 3.7 percent growth in recycling this year. A typical single-family home contains 439 pounds (199 kilograms) of copper, while a car has 50 pounds, the Copper Development Association estimates.
Scrap is the raw material for about 21 percent of refined copper supply, according to Deutsche Bank. About 38 percent of all copper consumed came from scrap last year, Wood Mackenzie estimates. Scrap supply is still “significantly down on the previous level,” Aurubis said. The U.S. and the U.K. are the top net exporters of copper scrap, and China is the biggest buyer, the International Copper Study Group in Lisbon says.
Reduced consumer spending and industrial activity, as well as low levels of construction that mean fewer demolitions, have all reached a bottom of their activity level to result in a low level of scrap, according to British Metals Recycling Association, which represents a 5.6 billion-pound ($9.27 billion) industry.
“Because of the length of the economic downturn, all the diminished sources of supply have converged to result in an acute shortage of scrap,” said Ian Hetherington, the director general of the Brampton, England-based group. “Because this has been so sustained and across all supply, it will take time to see the impact from the recovery. This isn’t pessimism. It’s deferred optimism. It will be a slow process.”
The U.K. produced about 13 million tons of recycled metal last year, compared with 15 million tons in 2009, both ferrous and nonferrous, according to the BMRA. The U.S. scrap industry processed 2 million tons of copper in 2012, according to the Institute of Scrap Recycling Industries. The nation accounts for more than one-fifth of the world’s supply, the Washington-based group says.
Copper for delivery in three months dropped 3 percent to $7,140 a ton on the London Metal Exchange this month, after falling 7.2 percent in 2013. As more scrap becomes available, the discount for recycled metal to the refined-metal price has widened, Macquarie Group Ltd. said Jan. 24. Scrap imported into China was $491 a ton below the LME price this month, compared with $397 a ton in December, according to CRU.
The amount of all types of used metal processed by some North America scrapyards probably fell 20 percent or 25 percent in the past few years, according to Jay Goldstein, president of Lorbec Metals USA Ltd., a Flint, Michigan-based scrap trader.
“In the current tight market I think that most of the scrap that is collected is working its way through the collection chain to be processed,” Christine Meilton, a consultant at CRU in London, said by e-mail in December. “I can’t see any reason for the amount of scrap collected to decline. We expect that it will increase. Generation will increase at least in line with economic growth.”
Imports of copper scrap by China, which consumes about 40 percent of the world’s copper, declined 10 percent to 4.38 million tons last year, according to customs data. Shipments are set to rebound as the government’s Operation “Green Fence,” aimed at stopping illegal imports of solid waste, came to an end, according to Macquarie.
“I’ve been in the business 39 years, and I’ll be honest with you, it’s as slow today as I remember it,” said Robert Voss, the founder of Voss International Ltd., a Rickmansworth, England-based scrap dealer. “Once the world gets off its feet again, then it will take scrap with it because demand will go up and then supply will follow.”
--Editors: Claudia Carpenter, Dan Weeks