Aluminum scrap consumers using secondary aluminum scrap as feedstcock

Aluminum scrap consumers are increasingly using secondary grades of feedstock, which has put a floor on secondary scrap prices and diminished overall scrap quality, according to Garey Rittenhouse, vice president of southern nonferrous trading at Mayfield Heights, Ohio-based PSC Metals Inc.

Many consumers of mill-grade scrap have been "making headway trying new secondary grades," Rittenhouse told the Institute of Scrap Recycling Industries’ Commodities Roundtable Forum in Chicago.

Rittenhouse said the trend has been driven largely by technological developments that have opened up new ways to process scrap, as well as a greater willingness to "invest capital in order to access a new sector of the supply chain."

This increased flexibility from large consumers and steady export demand is placing a "put" on secondary scrap prices, he said. "There’s always a fallback (for sellers). (Consumers) will not get it any cheaper if that ‘put’ is in place."

Rittenhouse said that the flexibility also has led to a decline in the overall quality of aluminum scrap packages, with dealers now less likely to spend money on sortation. "It is now harder to discern what is a secondary sheet package and what is a mill grade," he said. "Sometimes you can’t tell the value of the material until you process the whole thing."

He said this trend, combined with an avoidance of traditional consumer deductions such as the "iron deduct," also has forced more grades of aluminum scrap into the export and shredder supply chains.

Rittenhouse also said there has been an increasingly strong correlation between the ferrous and nonferrous scrap markets since 2006. "It’s been uncommon for the ferrous and nonferrous scrap markets to have a similar period of weakness at the same time, but this summer we saw both markets decline and experience lower availability," he said.

The total availability of scrap, excluding new production material, has been "lower overall" this year, Rittenhouse said.

Nick Adams, vice president of business information and member services at the Aluminum Association, agreed. "I’m hearing from our members that there’s not enough scrap to go around," he said.