Aluminum scrap sellers hold as LME price rises

Aluminum scrap buyers are still encountering resistance from scrap dealers in securing material, with many sellers now believed to be waiting for London Metal Exchange prices to move closer to $2,200 per tonne.

Buyers have reported over the past few months that many dealers have held on to swathes of scrap material while waiting for rising LME prices to support higher free-market prices.

Some had said that they expected to see a substantial increase in activity when the LME three-month aluminum price moved above $2,000 per tonne, with the closing price having languished below that mark since May 31 (amm.com, Aug. 13).

However, buyers on the sidelines of the Institute of Scrap Recycling Industries’ Commodities Roundtable in Chicago this week told AMM that even though the LME recently surged past the $2,000-per-tonne mark, many sellers are still holding out.

"We know that it&’s not because scrap is tight," one buyer said. "We can see they’ve got the scrap piled well above the fences around their yards." He believes sellers are waiting for LME prices to reach a range of $2,150 to $2,200 per tonne.

A second buyer agreed, saying that "$2,200 is the new $2,000."

The LME three-month aluminum price closed Wednesday’s official session at $2,080.50 per tonne (94.4 cents per pound).

A third buyer said that many dealers are in a position to wait well into the fourth quarter or even early 2013 if they desire. "They’ve got the cash; they’ve got the space. They’ll just keep stacking it up," he said.

However, a fourth buyer said his company has substantially increased its buying volumes since mid-August and doubted that many dealers would be holding out for months on end. "Most need the cash flow, especially the publicly listed companies," he said.

A few other market participants insisted nonferrous scrap flows were anemic across the country. "It’s possible some dealers are holding inventory, but I don’t know if that’s the norm," a fifth buyer said.