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June 14, 2010 Dear Friend,
Sims Metal Management
characterized scrap demand as very slow, suggesting prices
will fall in the Summer. It completely disagreed with
published American Metal Market prices, especially the
typical $78 per ton premium for Chicago over coastal or
rural markets. It believes coastal markets command premiums
beginning in 2004 owing to the rise of export demands for
Asia, and that the true relationships are the opposite as
AMM publishes. Further, Nucor bases its scrap surcharges on
those Chicago regional premiums since 4-1-2004.
Sims has made advances in
recovering bare copper wire from shredder scrap, sensors,
"Eddy Current" and mechanical separations. It believes the
next areas of technological progress will be recovery of
plastics or rubber from the 18% to 28% of typical shredded
scrap inbound tonnage that ends up in landfills as "shredder
fluff."
We revised Rio Tinto
earnings estimates for changes in metals price assumptions,
and cut our price target to $56 from $60 as we used a lower
long-term iron ore price forecast following current upward
revisions July 1st.
Faithfully,
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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