Aluminium scrap will be a big issue for secondary smelters in 2014

UK secondary aluminium producers are preparing for a difficult scrap market in 2014, with tightness expected across international markets and no expectations of lower prices to come.

“Scrap will be an issue next year – we’re trying to maintain sensible stock levels until the new year, but when we come back [after the holidays] it will be tight,” a producer said. “At the moment I can buy what I want, but if I try and push prices down I don’t get it.”

While some material is hidden from the market by dealers that are holding it back in anticipation of higher prices to come, it is not enough cover the expected shortfall across global markets next year.

“I went to 13 yards yesterday and 40 last week and I’m only just scraping together the tonnages I need,” a scrap dealer said. “I have enquiries from Europe but I can’t offer anything. There is not 1,000 tonnes available anywhere.”

Enquiries from Europe for scrap and ingot rose this week after some relief on exchange rates, which had rendered European prices uncompetitive over the past several weeks.

“The euro has been a big help this week, and there are now tonnages going into Europe on the back of that exchange-rate move,” a second producer said.

The euro was trading at about 1.168 to the sterling on Wednesday, from 1.199 at the start of October.

“We sold a 25-tonne [ingot] deal into Europe and it was a lot more lucrative than it would have been ten days ago,” a third producer said.

The UK spot market for secondary aluminium ingot was quiet this week, with most producers either stock-taking or focusing on contracted business for the fourth quarter until consumers are ready to start negotiations for 2014 supply.

LM24 pressure diecasting ingot stayed at £1,500-1,550 ($2,413-2,493) per tonne, while LM6/LM25 gravity diecasting ingot continued to trade at £1,700-1,740 per tonne.

“We’re rammed for November, but people are waiting to see what will happen for next year, and are not looking to book too far forward,” a fourth producer said.

Many producers are unable to fill the spot orders that are coming in from Europe because they cannot find the necessary amount of available scrap metal.

“The biggest problem is the squeeze on scrap – I could have sold three times as much volume but scrap prices are too high,” a fifth producer said.

A diecaster told Metal Bulletin that he expects his business volumes to grow by 20% next year.

Such growth will only exacerbate the scrap situation for secondary aluminium producers.