Markets on the Defensive?

Markets on the Defensive?

Lead/zinc industry executives gathered at a recent roundtable to review the bearish trends in their markets and discuss the challenges facing their industries.

In sharp contrast to the September bull market for aluminum, the lead and zinc markets were "on the defensive" as more than 75 industry executives gathered in Chicago for a Lead/Zinc Roundtable, sponsored by Scrap Processing and Recycling in September. In fact, the day before the roundtable, one domestic lead producer lowered its published list prices by 5 cents per pound to 45 cents, while zinc values dipped below 70 cents per pound on the London Metal Exchange. By week's end, other domestic lead producers had also lowered their prices, and zinc was looking at a seven-month low.

The roundtable, which featured two presentations on lead and two on zinc, was moderated by Louis J. Magdits, manager of raw materials for Exide Corp. (Reading, Pa.), and David S. Aronow, president of Arco Alloys Corp. (Detroit). The roundtable program was opened by Ronald Rosenson, president of Behr Precious Metals Inc. (Rockford, Ill.) and chairman of the Institute of Scrap Recycling Industries's (ISRI) nonferrous metals committee.

The Tightening Scrap Battery Market

Edward L. Puckett, general manager of the resource recycling division of GNB Inc. (St. Paul, Minn.), reviewed the lead industry's past decade, calling it "a roller coaster of prices and profits, strong and weak demand, and closures and expansions." In the early 1980s, lead producers enjoyed prices of more than 50 cents per pound, Puckett noted. Scrap processors, he pointed out, were sometimes paid as much as 15 cents per pound for used batteries.

The market reversed itself in subsequent years because increased lead demand and higher prices produced "too much expansion," Puckett said, resulting in oversupply. As demand eventually slipped, the low prices that resulted led to production cutbacks, plant closures, and bankruptcies.

Today's lead market has changed, Puckett observed, due to public and government efforts to ensure a clean environment, plus the related emphasis on recycling. "We have to recycle," he said. "We have no choice," adding that the use of lead may be restricted and "ultimately eliminated from all industrial and consumer products that are not readily recyclable." The push to increase lead recycling will result in further industry rationalizations, Puckett predicted, creating a more efficient, environmentally safer lead industry.

Though secondary lead companies will likely dominate supply, scrap supplies will be abundant, he asserted. "Markets for industrial batteries--both motive power and stationary types--have been increasing by leaps and bounds," he said. However, efforts by wholesalers and retailers to take back used batteries and by battery manufacturers to collect and dispose of their own products may prompt primary lead producers to become recyclers, reducing the availability of used batteries for scrap processors. In fact, according to Puckett, at least 50 percent of scrap batteries are collected directly by battery manufacturers. Consequently, scrap processors may only have access to batteries in discarded vehicles.

Adopting an Active Approach

Jeffrey L. Zelms, president of the Doe Run Co. (St. Louis), focused on the lead industry's response to the Lead Exposure Reduction Act (HR 5372). The bill is similar to Senate legislation introduced in June. However, while the Senate version excludes the recycling of metal, paper, glass, plastics, and textiles from the measure's bans on the processing and distribution of certain goods containing lead, the House bill does not.

Zelms recommended that the lead industry take an active approach toward educating and influencing lawmakers on its concerns. Though this can be expensive, cooperative efforts between members of the lead industry can be vital to all, he said.

The lead industry recently proposed draft legislation that revises HR 5372 and excludes lead-acid batteries from the measure's bans. "We've succeeded in protecting 78 percent of our market," Zelms stated, "and that's significant progress." In addition, he continued, the bill's current language has completely stricken the original mandate for tightened ambient air and water standards. "We'd like to believe that our evidence and our lobbying efforts influenced this positive change," Zelms said.

Zelms also recalled the advice of a deputy administrator of the Environmental Protection Agency, who urged lead industry leaders to be more aggressive and more active in terms of self-discipline and public relations. Zelms recognized that industry trade associations provide critical public information and lobbying efforts, but he stressed that "they cannot substitute for individual companies' active participation in their territories, as well as on the national scene.”

Zinc Moves Toward Surplus

Steven J. Wiener, zinc service manager for Pasco Zinc Products Corp. (Memphis, Tenn.), examined the near-term performance of the zinc market, crediting unexpected strong consumer demand for absorbing excess zinc on the marketplace. The main influence on zinc price increases has been an 11-percent growth in consumption since 1984, he observed. Consequently, he pointed out, the Metals Week average rose from 37 cents per pound in 1986 to 82 cents per pound in 1989. Through August, the average was closer to 78 cents per pound, indicating a reversal of the upward trend, Wiener said. "Price stability and an eventual decline over the long term are beginning to appear," he said. The zinc market, he concluded, is starting its move from a deficit to a surplus.

He also reviewed his company's recent push toward greater reliance on scrap rather than primary zinc. Pasco's scrap consumption now consists mostly of remelt zinc die-cast and zinc die-cast alloy, as well as zinc clips, engravers' zinc, and galvanizers' residues. Not only are there relatively few zinc scrap consumers left in the United States, Wiener said, but "there are nowhere near the tonnages available for a 100-percent secondary zinc feed operation." The factors that control the ability of zinc oxide and zinc dust producers to consume recyclable materials, Wiener outlined, are:

the availability of zinc scrap;

competitive pricing of scrap vs. primary zinc;

customer specifications limiting lead and cadmium levels;

disposal of derived byproducts from the usage of secondary zinc items; and

oversupply in the zinc oxide and dust markets, which seem to force sales price levels down to unrealistic levels to ensure market share.

Wiener noted that today's world zinc industry has concentrated to the point where only five major producer groups account for 40 to 50 percent of the Western Hemisphere's production of zinc and lead. He predicted that this trend would continue.

Quality Demands Increase for Coated Sheet

Allan D. Finch, program manager of industry marketing for Bethlehem Steel Corp. (Bethlehem, Pa.), discussed the markets for coated-sheet products, including hot-dip galvanized, electrogalvanized, Galvalume, Galfan, terne plate, and aluminum- and tincoated sheets. He focused on galvanizing, since hot-dip and electrogalvanized account for 85 to 90 percent of coated sheet consumed in the United States.

By the mid-1990s, Finch predicted, total demand for coated sheets will be around 18 million tons, indicating a coating line use rate of more than 80 percent. The automotive and construction markets account for most of the coated-sheet demand, he said. At the same time, he estimated, "70 percent of the automotive sheet steel will be metallic-coated," increasing the market from 5.2 million to 7 million tons per year. Sixteen percent of all steel products used in construction applications are coated-sheet products, he stated, which accounts for 4.7 million tons annually.

Finch also discussed Bethlehem Steel's commitment to coated materials despite threats from competing materials such as plastics, aluminum, concrete, and wood. He noted that the automotive industry has moved from using hot-dipped galvanized sheets to new products such as electrogalvanized zinc nickel and galvannealed sheets for certain applications.

Markets on the Defensive?

Lead/zinc industry executives gathered at a recent roundtable to review the bearish trends in their markets and discuss the challenges facing their industries.

In sharp contrast to the September bull market for aluminum, the lead and zinc markets were "on the defensive" as more than 75 industry executives gathered in Chicago for a Lead/Zinc Roundtable, sponsored by Scrap Processing and Recycling in September. In fact, the day before the roundtable, one domestic lead producer lowered its published list prices by 5 cents per pound to 45 cents, while zinc values dipped below 70 cents per pound on the London Metal Exchange. By week's end, other domestic lead producers had also lowered their prices, and zinc was looking at a seven-month low.

The roundtable, which featured two presentations on lead and two on zinc, was moderated by Louis J. Magdits, manager of raw materials for Exide Corp. (Reading, Pa.), and David S. Aronow, president of Arco Alloys Corp. (Detroit). The roundtable program was opened by Ronald Rosenson, president of Behr Precious Metals Inc. (Rockford, Ill.) and chairman of the Institute of Scrap Recycling Industries's (ISRI) nonferrous metals committee.

The Tightening Scrap Battery Market

Edward L. Puckett, general manager of the resource recycling division of GNB Inc. (St. Paul, Minn.), reviewed the lead industry's past decade, calling it "a roller coaster of prices and profits, strong and weak demand, and closures and expansions." In the early 1980s, lead producers enjoyed prices of more than 50 cents per pound, Puckett noted. Scrap processors, he pointed out, were sometimes paid as much as 15 cents per pound for used batteries.

The market reversed itself in subsequent years because increased lead demand and higher prices produced "too much expansion," Puckett said, resulting in oversupply. As demand eventually slipped, the low prices that resulted led to production cutbacks, plant closures, and bankruptcies.

Today's lead market has changed, Puckett observed, due to public and government efforts to ensure a clean environment, plus the related emphasis on recycling. "We have to recycle," he said. "We have no choice," adding that the use of lead may be restricted and "ultimately eliminated from all industrial and consumer products that are not readily recyclable." The push to increase lead recycling will result in further industry rationalizations, Puckett predicted, creating a more efficient, environmentally safer lead industry.

Though secondary lead companies will likely dominate supply, scrap supplies will be abundant, he asserted. "Markets for industrial batteries--both motive power and stationary types--have been increasing by leaps and bounds," he said. However, efforts by wholesalers and retailers to take back used batteries and by battery manufacturers to collect and dispose of their own products may prompt primary lead producers to become recyclers, reducing the availability of used batteries for scrap processors. In fact, according to Puckett, at least 50 percent of scrap batteries are collected directly by battery manufacturers. Consequently, scrap processors may only have access to batteries in discarded vehicles.

Adopting an Active Approach

Jeffrey L. Zelms, president of the Doe Run Co. (St. Louis), focused on the lead industry's response to the Lead Exposure Reduction Act (HR 5372). The bill is similar to Senate legislation introduced in June. However, while the Senate version excludes the recycling of metal, paper, glass, plastics, and textiles from the measure's bans on the processing and distribution of certain goods containing lead, the House bill does not.

Zelms recommended that the lead industry take an active approach toward educating and influencing lawmakers on its concerns. Though this can be expensive, cooperative efforts between members of the lead industry can be vital to all, he said.

The lead industry recently proposed draft legislation that revises HR 5372 and excludes lead-acid batteries from the measure's bans. "We've succeeded in protecting 78 percent of our market," Zelms stated, "and that's significant progress." In addition, he continued, the bill's current language has completely stricken the original mandate for tightened ambient air and water standards. "We'd like to believe that our evidence and our lobbying efforts influenced this positive change," Zelms said.

Zelms also recalled the advice of a deputy administrator of the Environmental Protection Agency, who urged lead industry leaders to be more aggressive and more active in terms of self-discipline and public relations. Zelms recognized that industry trade associations provide critical public information and lobbying efforts, but he stressed that "they cannot substitute for individual companies' active participation in their territories, as well as on the national scene.”

Zinc Moves Toward Surplus

Steven J. Wiener, zinc service manager for Pasco Zinc Products Corp. (Memphis, Tenn.), examined the near-term performance of the zinc market, crediting unexpected strong consumer demand for absorbing excess zinc on the marketplace. The main influence on zinc price increases has been an 11-percent growth in consumption since 1984, he observed. Consequently, he pointed out, the Metals Week average rose from 37 cents per pound in 1986 to 82 cents per pound in 1989. Through August, the average was closer to 78 cents per pound, indicating a reversal of the upward trend, Wiener said. "Price stability and an eventual decline over the long term are beginning to appear," he said. The zinc market, he concluded, is starting its move from a deficit to a surplus.

He also reviewed his company's recent push toward greater reliance on scrap rather than primary zinc. Pasco's scrap consumption now consists mostly of remelt zinc die-cast and zinc die-cast alloy, as well as zinc clips, engravers' zinc, and galvanizers' residues. Not only are there relatively few zinc scrap consumers left in the United States, Wiener said, but "there are nowhere near the tonnages available for a 100-percent secondary zinc feed operation." The factors that control the ability of zinc oxide and zinc dust producers to consume recyclable materials, Wiener outlined, are:

the availability of zinc scrap;

competitive pricing of scrap vs. primary zinc;

customer specifications limiting lead and cadmium levels;

disposal of derived byproducts from the usage of secondary zinc items; and

oversupply in the zinc oxide and dust markets, which seem to force sales price levels down to unrealistic levels to ensure market share.

Wiener noted that today's world zinc industry has concentrated to the point where only five major producer groups account for 40 to 50 percent of the Western Hemisphere's production of zinc and lead. He predicted that this trend would continue.

Quality Demands Increase for Coated Sheet

Allan D. Finch, program manager of industry marketing for Bethlehem Steel Corp. (Bethlehem, Pa.), discussed the markets for coated-sheet products, including hot-dip galvanized, electrogalvanized, Galvalume, Galfan, terne plate, and aluminum- and tincoated sheets. He focused on galvanizing, since hot-dip and electrogalvanized account for 85 to 90 percent of coated sheet consumed in the United States.

By the mid-1990s, Finch predicted, total demand for coated sheets will be around 18 million tons, indicating a coating line use rate of more than 80 percent. The automotive and construction markets account for most of the coated-sheet demand, he said. At the same time, he estimated, "70 percent of the automotive sheet steel will be metallic-coated," increasing the market from 5.2 million to 7 million tons per year. Sixteen percent of all steel products used in construction applications are coated-sheet products, he stated, which accounts for 4.7 million tons annually.

Finch also discussed Bethlehem Steel's commitment to coated materials despite threats from competing materials such as plastics, aluminum, concrete, and wood. He noted that the automotive industry has moved from using hot-dipped galvanized sheets to new products such as electrogalvanized zinc nickel and galvannealed sheets for certain applications.