BASIC PRECIOUS AND NON-FERROUS METALS IN UK – ANALYSIS

Headlines

• Basic precious and non-ferrous metals market size in the UK contracted by 7% in 2013 due to decrease in aluminium, gold, silver, platinum and copper prices
• 51% increase in industry’s turnover was driven by the growing demand from automotive industry accounting for 14% of B2B purchases and aircraft and spacecraft industry accounting for 8%
• In 2013 a new Scrap Metal Dealers Act has been introduced implementing more effective licensing for scrap dealers and extending the ban for buying scrap for cash in order to decrease the level of metal theft
• Basic precious and non-ferrous metals production in the UK is expected to grow by marginal less than 1% over 2013-2019 due to growing volumes of precious metals and increasing prices of platinum and palladium

Market Trends

• The basic precious and non-ferrous metals market in UK contracted by 7.3% in 2013 to £12.9 billion. The market shrunk due to the declining global prices of basic metals including aluminium, copper and precious metals.
• Motor vehicles, trailers and semi-trailers accounted for 14% of purchases in industry in 2013. The latter share experienced a 17% growth over 2013. In 2013 UK car production increased by 5% whereas sales grew by 10% respectively.[1] Higher vehicle production and increasing use of aluminium determined that aluminium accounted for the largest share – 32% of the UK market in 2013 totalling in £4.1 billion. Its share increased by 22% over the year. Automotive industry gained from lower aluminium prices as it decreased by 8.7% to a US$1,847 per metric ton in the end of 2013[2]. Decline was experienced due to the surplus of global production as demand for aluminium in China and Eurozone has slowed down.[3]
• Market structure of metal ores has been changing permanently as demand of aluminium in UK automotive industry continued to increase. Automotive companies have been looking into ways to reduce CO2 emissions in order to comply with new EU standards. Aluminium is a solution to reduce vehicle weight and improve emissions. As a consequence in 2013 Land Rover announced construction of new plant for production of aluminium chassis that will cost GBP1.5 billion signalling new era for automotive industry raw material suppliers.
• Growing automotive industry in UK has positively affected the demand for platinum and palladiums as these precious metals are used in production of auto catalysts. The global price of the platinum declined by 10% due to the surplus in the market.[4] Palladium global price increased by 2% as palladium experienced a 7^th year of deficit in the market.[5]Due to the improving economic performance in the UK and increasing customer trust, precious metals recorded a 36% drop in the value of its market size. Growing strength in equities decreased the demand for precious metals that has been viewed as a reliable substitute for the investment earlier.[6] Global price of gold bullion decreased by 26% to US$1,235 per troy ounce. The silver was no exception as the price fell by 36%[7] and reached US$19.6 an ounce.[8]
• Copper’s market size in UK dropped by 11% accounting for 15% of the total market size of the industry in 2013. Its value stood at £1.9 billion. The fall was driven by the decline in international copper price that dropped to US$7,332 per metric ton in December 2013 recording a decline of 7.9%.[9] This was due to the slowdown in China’s economy and growing stocks of copper which reached their peak since 2003 in London’s Metal Exchange.[10]