The economic forecast for Germany was revised in early September, giving a more optimistic prediction for the remainder of this year but a weaker outlook for 2021. Economic affairs minister Peter Altmaier has said that the recession in the first half of the year was less severe than he had feared. While new lockdown measures are being seen in Europe, only certain regions within Germany appear to be implementing stricter rules.
Regarding industry, there are difficulties within the aviation business: Airbus sold only one plane in August! This has led to weaker demand for metals typically used by this sector. The Coronavirus pandemic is causing a great reluctance to invest in Germany’s mechanical and plant engineering sector, whose incoming orders fell by 16% in real terms in the first seven months of this year while production was 14% below the previous year’s value in real terms. For the aviation and the mechanical/plant engineering sectors, there are certainly limits on growth that will prevent them from growing in line with the overall economy.
A light at the end of the tunnel is the automotive industry. Even though 533,000 fewer cars were registered by May 2020 than in the same period last year as a result of the pandemic, a largely normal situation can be expected in this year’s final quarter. Production is rising and the passenger car industry’s order books are full. Government incentives to buy hybrid and pure electric cars are working. If you order today, you may have to wait half a year until you get your new car. Together with this good news has been healthy demand for aluminium scrap in the secondary sector and an improving situation in the primary aluminium sector. In particular, all silicon-related alloys have been in high demand during the automotive industry’s recovery phase.
All other metals have entered a sort of hibernation as China’s limited import quotas are influencing the domestic market. The brass sector is not back to pre-COVID conditions and the copper-zinc alloy has been negatively impacted by this situation.
Generally, EU economic growth is fundamentally linked to the use of metals. Europe’s Green Deal targets climate neutrality by 2050 and recognizes recycling and access to our raw materials as a key enabler for a globally-competitive, green and digital Europe. In addition, the LME is looking into providing a trading platform that consumers can use to source low-carbon aluminium, which is typically produced with hydro power or other forms of renewable energy. Some producers have already introduced ingots made mainly from scrap as car producers focus increasingly on offering passenger vehicles which are as climate neutral as possible. All this is good news for the recycling industry and will lead to increased scrap demand.
The credit insurance sector has been watching developments very closely this year, as have credit checkers on the operational side of the metals industry. A Coface insurance group survey has revealed that only 62% of participants have granted their customers’ payment terms in 2020 - significantly fewer than the 81% in 2019. From the automotive sector, it is reported that the average overdue payment period is more than 20 days beyond what was contractually agreed. Less credit insurance means a reduced possibility of delivering the scrap.
More important is the ability to diversify nationally and internationally. As said in previous reports: a deal is done only when the invoice is paid and so choose your partners wisely.
European Metal Recycling Limited (GBR), Board Member of the BIR Non-Ferrous Metals Division