1989 Commodity Wrap-Up

Scrap Paper and Metals Follow Economy’s Downward Glide  

As the U.S. economy worked its way down from its lofty perch of recent years, most of industry followed suit. Scrap paper and metals were no exceptions--although, in several cases, scrap’s market share held its own.

The period from 1982 to 1989 was widely acknowledged as one of the strongest and most prolonged economic expansions this country has ever seen. Last year ended by recording the 85th consecutive month of economic growth--a new record for peacetime. That was the good news. On the downside, there was increasing worry over the size of the federal deficit, persistent monthly trade deficits, the possibility for growing inflation, and, as the year progressed, government indicators suggesting the economy had lost much of its zing. By the fourth quarter of 1989, there was decidedly less optimism voiced about the ability of the economy to bounce back, as it had from two slumps during the past seven years.

Those closest to the paper and metalworking industries saw market tenor change by midyear, and anticipated generally lower prices and reduced volumes.

For most industries in 1989, fewer pluses were recorded dm in 1988. In several instances, however, scrap's share of the total market continued to advance. In fact, some all-time records were set by processors and consumers of scrap metals and scrap paper. What follows is a statistical review of commodity ups and downs in 1989.

Aluminum

Although many 1989 figures were not finalized at press time, preliminary indications reveal that less aluminum was consumed last year than in 1988--or possibly even 1987. Aluminum usage slipped during the second half of 1989 and fell noticeably in the final quarter.

Total domestic shipments of ingot and mill products in 1989 were estimated to be approximately 4 percent below the previous year. Meanwhile, primary production was estimated at 4.03 million metric tons (mmt), up 2 percent over the 3.95 mmt produced in 1988. As a result of lower consumption activity in 1989, less scrap was estimated to have been consumed (excepting used beverage cans), causing scrap's share of the market to drop approximately 1 percentage point.

According to Metals Week, the U.S. transacted price for aluminum ingot averaged $0.89 per pound in 1989, compared with just over $1.12 in 1988.

Copper

To the surprise of some, demand for copper products held up relatively well in the second half of 1989, virtually assuring a fourth consecutive yearly increase for the red metal. Preliminary numbers published by the Institute of Scrap Recycling Industries (ISRI) suggest that domestic copper consumption may have increased by as much as 2.4 percent--a rate higher than other published estimates.

To meet this demand, refined production increased by around 5.5 percent and scrap usage increased by approximately 1.0 percent. The balance was met by imports and a further drawdown of refinery stocks. ReMA estimates that copper scrap's share of the market, which stood at 42.8 percent in 1988, will be 42.0 percent in 1989, less than a point lower.

Aided by highly publicized supply problems during much of the year, average copper prices were higher in 1989 than the previous year. Spot COMEX posted a $1.25 average, versus $1.15 in 1988. LME averages also were higher, with the cash settlement 19 percent above 1988. Scrap prices also were up: No. 2 averaged more than $1.00 per pound in 1989, compared with an average of $0.88 per pound in 1988.

Iron and Steel

Figures from the American Iron and Steel Institute (AISI) on the domestic steel industry reveal that 1989 overall raw steel production was slightly lower than in the previous year, while overall shipments of finished steel products were virtually unchanged. However, ReMA's estimate for apparent steel consumption pointed to a 2.9percent decline, despite AISI's shipment figures. (ISRI numbers may be biased on the low side due to incomplete data on overall domestic scrap consumption.)

Steel production in 1989, as reported by AISI, was 97.5 million net tons (mnt), 2.4 percent below the 99.9 mnt produced m 1988. Steel demand peaked in the first half of 1989 but held up better than many had predicted. The steel industry called 1989 the third year of recovery following the industry's 1982-1986 depression.

Ferrous scrap values averaged slightly lower in 1989: the American Metal Market composite price for No. 1 heavy melt was $107.30 per gross ton, compared with $108.98 in 1988. In addition, following a record high average price for auto bundles in 1988 ($134.71 per gross ton), values dropped to $118.43 per gross ton last year--still the second-highest yearly average ever recorded.

Lead

Consumption of lead in the United States in 1989 appeared virtually unchanged from the 1.35 million short tons used in 1988. Battery demand continued to dominate the domestic market, accounting for more than 70 percent of all lead consumed. Last year, shipments of replacement batteries plus original equipment batteries totaled 77.67 million units, 0.5 percent higher than in 1988.

To meet total demand last year, lead recovered from scrap increased to approximately 820,000 short tons--the best output recorded by secondary smelters and refiners since 1979. On the other hand, ReMA estimates that primary production was lower, as were net imports. Refined stocks fell by an estimated 6,000 tons.

Scrap's share of the lead market, paced by large increases by secondary smelters, exceeded 60 percent for the first time ever. Lead prices in North America moved within a fairly narrow band in 1989; LME cash values averaged 12 percent higher than in 1988.

Nickel/Stainless Steel

Preliminary figures for 1989 shipments of stainless steel mill products indicate about a 7-percent drop-off from the record-setting numbers of 1988. Although most end-use markets for stainless quieted as the year progressed, the weakness in demand was largely attributed to consumer destocking, not to a fundamental change in consumer or capital spending patterns.

As a result of lower immediate demand for nickel-containing scrap, estimated stainless steel scrap consumption fell approximately 5.7 percent, to 745,000 net tons. However, even with lower scrap consumption, scrap's share of the market rose to approximately 51 percent, slightly above the 50 percent posted in 1988.

Nickel values trended sharply lower m 1989 compared with 1988. The Metals Week dealer cathode average was $5.98 per pound last year compared with $6.09 in 1988; by December the monthly average had slumped to less dm $4.00 per pound.

Scrap Paper

While acknowledging some weakness in the paper and paperboard industries (especially the newsprint sector) in the second half of 1989, the year ended with record-setting marks for paper and paperboard output, scrap paper consumption, and scrap paper market share.

Production totaled 77.06 million short tons in 1989; although up less than 1 percent from 1988, this marked the fourth consecutive yearly increase. Likewise, scrap paper usage last year set a record, with more than 21 million tons consumed domestically. All scrap paper grades recorded year-on-year increases, with corrugated demand leading the group with a 6.1-percent increase over 1988. Prices of most scrap paper grades moved up during last year, but several bulky grades remained at zero or had a negative value for the year.

Zinc

Domestic consumption of slab zinc in 1989 is estimated to have been approximately 3 percent lower than the 1.2 million short tons consumed in 1988. Relatively strong markets for galvanized zinc products are believed to have offset the reduction in zinc consumed by the nation's brass mills and foundries.

Domestic smelter production continued to run at full capacity in 1989, although preliminary data show that imports of slab zinc were lower dm in 1988. Nevertheless, imports amounted to nearly 70 percent of total zinc consumption.

Scrap Paper and Metals Follow Economy’s Downward Glide  

As the U.S. economy worked its way down from its lofty perch of recent years, most of industry followed suit. Scrap paper and metals were no exceptions--although, in several cases, scrap’s market share held its own.

The period from 1982 to 1989 was widely acknowledged as one of the strongest and most prolonged economic expansions this country has ever seen. Last year ended by recording the 85th consecutive month of economic growth--a new record for peacetime. That was the good news. On the downside, there was increasing worry over the size of the federal deficit, persistent monthly trade deficits, the possibility for growing inflation, and, as the year progressed, government indicators suggesting the economy had lost much of its zing. By the fourth quarter of 1989, there was decidedly less optimism voiced about the ability of the economy to bounce back, as it had from two slumps during the past seven years.

Those closest to the paper and metalworking industries saw market tenor change by midyear, and anticipated generally lower prices and reduced volumes.

For most industries in 1989, fewer pluses were recorded dm in 1988. In several instances, however, scrap's share of the total market continued to advance. In fact, some all-time records were set by processors and consumers of scrap metals and scrap paper. What follows is a statistical review of commodity ups and downs in 1989.

Aluminum

Although many 1989 figures were not finalized at press time, preliminary indications reveal that less aluminum was consumed last year than in 1988--or possibly even 1987. Aluminum usage slipped during the second half of 1989 and fell noticeably in the final quarter.

Total domestic shipments of ingot and mill products in 1989 were estimated to be approximately 4 percent below the previous year. Meanwhile, primary production was estimated at 4.03 million metric tons (mmt), up 2 percent over the 3.95 mmt produced in 1988. As a result of lower consumption activity in 1989, less scrap was estimated to have been consumed (excepting used beverage cans), causing scrap's share of the market to drop approximately 1 percentage point.

According to Metals Week, the U.S. transacted price for aluminum ingot averaged $0.89 per pound in 1989, compared with just over $1.12 in 1988.

Copper

To the surprise of some, demand for copper products held up relatively well in the second half of 1989, virtually assuring a fourth consecutive yearly increase for the red metal. Preliminary numbers published by the Institute of Scrap Recycling Industries (ISRI) suggest that domestic copper consumption may have increased by as much as 2.4 percent--a rate higher than other published estimates.

To meet this demand, refined production increased by around 5.5 percent and scrap usage increased by approximately 1.0 percent. The balance was met by imports and a further drawdown of refinery stocks. ReMA estimates that copper scrap's share of the market, which stood at 42.8 percent in 1988, will be 42.0 percent in 1989, less than a point lower.

Aided by highly publicized supply problems during much of the year, average copper prices were higher in 1989 than the previous year. Spot COMEX posted a $1.25 average, versus $1.15 in 1988. LME averages also were higher, with the cash settlement 19 percent above 1988. Scrap prices also were up: No. 2 averaged more than $1.00 per pound in 1989, compared with an average of $0.88 per pound in 1988.

Iron and Steel

Figures from the American Iron and Steel Institute (AISI) on the domestic steel industry reveal that 1989 overall raw steel production was slightly lower than in the previous year, while overall shipments of finished steel products were virtually unchanged. However, ReMA's estimate for apparent steel consumption pointed to a 2.9percent decline, despite AISI's shipment figures. (ISRI numbers may be biased on the low side due to incomplete data on overall domestic scrap consumption.)

Steel production in 1989, as reported by AISI, was 97.5 million net tons (mnt), 2.4 percent below the 99.9 mnt produced m 1988. Steel demand peaked in the first half of 1989 but held up better than many had predicted. The steel industry called 1989 the third year of recovery following the industry's 1982-1986 depression.

Ferrous scrap values averaged slightly lower in 1989: the American Metal Market composite price for No. 1 heavy melt was $107.30 per gross ton, compared with $108.98 in 1988. In addition, following a record high average price for auto bundles in 1988 ($134.71 per gross ton), values dropped to $118.43 per gross ton last year--still the second-highest yearly average ever recorded.

Lead

Consumption of lead in the United States in 1989 appeared virtually unchanged from the 1.35 million short tons used in 1988. Battery demand continued to dominate the domestic market, accounting for more than 70 percent of all lead consumed. Last year, shipments of replacement batteries plus original equipment batteries totaled 77.67 million units, 0.5 percent higher than in 1988.

To meet total demand last year, lead recovered from scrap increased to approximately 820,000 short tons--the best output recorded by secondary smelters and refiners since 1979. On the other hand, ReMA estimates that primary production was lower, as were net imports. Refined stocks fell by an estimated 6,000 tons.

Scrap's share of the lead market, paced by large increases by secondary smelters, exceeded 60 percent for the first time ever. Lead prices in North America moved within a fairly narrow band in 1989; LME cash values averaged 12 percent higher than in 1988.

Nickel/Stainless Steel

Preliminary figures for 1989 shipments of stainless steel mill products indicate about a 7-percent drop-off from the record-setting numbers of 1988. Although most end-use markets for stainless quieted as the year progressed, the weakness in demand was largely attributed to consumer destocking, not to a fundamental change in consumer or capital spending patterns.

As a result of lower immediate demand for nickel-containing scrap, estimated stainless steel scrap consumption fell approximately 5.7 percent, to 745,000 net tons. However, even with lower scrap consumption, scrap's share of the market rose to approximately 51 percent, slightly above the 50 percent posted in 1988.

Nickel values trended sharply lower m 1989 compared with 1988. The Metals Week dealer cathode average was $5.98 per pound last year compared with $6.09 in 1988; by December the monthly average had slumped to less dm $4.00 per pound.

Scrap Paper

While acknowledging some weakness in the paper and paperboard industries (especially the newsprint sector) in the second half of 1989, the year ended with record-setting marks for paper and paperboard output, scrap paper consumption, and scrap paper market share.

Production totaled 77.06 million short tons in 1989; although up less than 1 percent from 1988, this marked the fourth consecutive yearly increase. Likewise, scrap paper usage last year set a record, with more than 21 million tons consumed domestically. All scrap paper grades recorded year-on-year increases, with corrugated demand leading the group with a 6.1-percent increase over 1988. Prices of most scrap paper grades moved up during last year, but several bulky grades remained at zero or had a negative value for the year.

Zinc

Domestic consumption of slab zinc in 1989 is estimated to have been approximately 3 percent lower than the 1.2 million short tons consumed in 1988. Relatively strong markets for galvanized zinc products are believed to have offset the reduction in zinc consumed by the nation's brass mills and foundries.

Domestic smelter production continued to run at full capacity in 1989, although preliminary data show that imports of slab zinc were lower dm in 1988. Nevertheless, imports amounted to nearly 70 percent of total zinc consumption.