Reuters: Regulatory News: Lead recyclers under EU cartel investigation-sources

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Lead recyclers under EU cartel investigation-sources Nov 6th 2012, 15:56 Tue Nov 6, 2012 10:56am EST * Recyclers Ecobat, JCI, Campine, Recylex under investigation-sources * Scrap prices soar in Europe due to low availability * Some recyclers shut down as soaring scrap costs erase margins By Harpreet Bhal and Maytaal Angel LONDON, Nov 6 (Reuters) - Four of Europe's top lead recyclers are being investigated by the European Commission (EC) for suspected cartel practices related to lead scrap purchasing, three industry sources told Reuters. Ecobat and JCI, the top two lead recyclers by production, along with Recylex and Campine are being probed, the sources said. In September the EC said it had conducted a raid on several lead recyclers which it declined to name. It said the inspections were a preliminary step and did not mean the companies were guilty of anti-competitive behaviour. "We understand the investigation is on price collusion on the lead scrap purchasing side, meaning scrap batteries," said a source with direct knowledge of the investigation. About 70 percent of the 9.4 million tonnes of lead produced annually is made by recycling old, scrap batteries, usually from cars. This makes lead scrap the single most important raw material for producers of recycled lead, and makes recyclers vulnerable to higher scrap price. Recylex and JCI confirmed EC officials had visited their premises on Sept. 26, but could not give further details on the preliminary investigation. Campine said it was cooperating fully with the EC's investigation and Ecobat, contacted twice by Reuters, declined to comment citing company policy. A press officer at the European Commission also declined to comment when contacted by Reuters last week. Europe's scrap lead prices have risen to more than 65 percent of current London Metal Exchange (LME) prices this year as supplies dwindled after few car batteries failed last year thanks to a mild winter, and fewer drivers traded in their old cars for new. Also pushing up prices was an increase in European recycling capacity that has boosted competition for old scrap batteries. Traders note that despite the suspected cartel practices, scrap prices have continued to rise. "If they agreed something to keep down scrap prices they did a bad job because prices are absolutely rocketing," said a physical lead trader based in London. Another source close to the lead market said: "It could be that prices would have been even higher without this." Either way, the end result is margins for lead recyclers have been pressured, sometimes to breaking point. Some traders said that a smelter in Morocco and one in Bulgaria buckled under the pressure and shut down recently. Lead producers cannot pass on scrap costs to their clients, because the lead price is set globally on the LME, and has risen about 5 percent in the year to date. As a result, despite a sharp pick-up in demand from battery makers ahead of winter, lead producers, bereft of scrap feed, are struggling to produce enough metal for their clients, let alone fatten profits. "We are absolutely shocked by this situation. There's almost no scrap and almost no lead around. I've been in the market for 12 years and I've never seen such a situation," said the London-based lead trader. Link this Share this Digg this Email Reprints

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