European aluminium scrap buyers face hurdles as demand increases but not supply after months-long lockdown restrictions

European aluminium scrap prices have started rising in recent weeks as demand is increasing in the market tightened by limited supply due to the lack of fresh scrap generation over months of COVID-19 lockdown restrictions. Usage of scrap also fell but not as much as the generation of new scrap, as some manufacturers tried to maintain operations using raw material stocks in the initial phase of the pandemic.

"There was no fresh generation of scrap for three to four months, but people continued to sell, export and use scrap material in that time," one alloy producer said.

Demand for alloy and scrap is now growing as more and more manufacturers are recommencing their operations after lockdown restrictions across Europe, particularly from the crucial automotive industry.

The United Kingdom automobile sector rebounded in July with registrations growing by 11.3 per cent year-on-year to 174,885 as special offers incentivised customers to purchase.

According to a secondary alloy producer, major automobile or automobile component manufacturers are going back to full production. Some are even hoping to hit their annual targets at the end of the year.

This demand recovery is improving alloy price on one hand, while on the other, resulting in a need for fresh scrap, which at the moment has a tight supply due to months-long lockdown restrictions.

The weekly Argus assessment for DIN 226 die casting alloy delivered to consumer works in Europe reached €1,350-1,400 per tonne last week, from lows of €1,200-1,280 per tonne in mid-July, while the assessment for UK LM 24 alloy delivered to consumer works reached £1,250-1,300 per tonne from £1,000-1,100 per tonne over the same period.

But there is less uncertainty over the robustness of higher demand. Last month, automotive sales dipped in Europe, including car registrations in the UK dropped by 5.8 per cent over the year.

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