European aluminium scrap suppliers need to expand their customer base to maintain healthy business levels as manufacturing industries slow against recessionary forces driven by the COVID-19 epidemic. However, it will be a difficult venture with so many consumers facing uncertain futures.
Murat Bayram, Director and Head of European Non-Ferrous business at EMR Ltd. said: "Space is limited on the yard and if the metal isn't flowing out anymore, you have to do something," director of European Metal Recycling's (EMR) European non-ferrous business. We will see problems on the aluminium side, not only in autos but in aerospace and others too."
The lockdowns imposed in Europe due to the COVID-19 pandemic, reflected scrap generation decline as factory activities remained suspended and third-party collections were turned away by several major scrapyards. Aluminium scrap prices were initially expected to raise post-lockdown on a resurgence of demand from restarting industries.
The end-user demand remains although certainly low in more than one principal industry for aluminium alloy producers and their scrap suppliers. Most notably, the automotive market has seen some of the worst sales numbers, with several European markets seeing sales fall by around 90% on the year in April’20. The worst-hit is the UK, where new car sales have run at their lowest levels in nearly 70 years over the past two months.
Bayram said: "Autos have not been a strong industry in Europe for a few years. Sales numbers were not so well last year, and automakers were already pushing suppliers to supply cheaper. The whole industry is under pressure and we can't see if there will be a solution or not."
Scrap supply has suffered and remains limited, even during the industrial restarts that had been hoped would provide enhanced demand levels in recent weeks.
Bayram said: “In Switzerland, where very few restrictions were applied to industry, scrap flows stand at about 80% of pre-pandemic levels. Germany is at about 70%, with the Benelux region at about 60pc, and flows are down by about 50pc in Spain and Italy. The longer the slowdown in industrial markets, and autos in particular, the more likely it is that some manufacturing companies will fold and demand levels will not return to pre-pandemic levels, even over the longer term.”
“Scrap companies will be forced to look for new outlets, but that will be made harder by the uncertainty surrounding end-user markets.”
"Raw material will find its way and the market will find a new equilibrium, but you need to be sure that the customer you sell to today is alive tomorrow," Bayram said.
As a result of the economic uncertainty, banks have been cutting credit limits on metals producers in expectation of a rise in bankruptcies, further compounding the difficulty in finding new sales targets.
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