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NASAAC-based contracts to remain in secondary aluminum market
Edited by : AL CIRCLE
2 min read
The North American Special Aluminum Alloy Contract will not die as a pricing mechanism, said Alan Dick, president of scrap supplier Alpert & Alpert Iron & Metal, during a panel session Thursday at the Institute of Scrap Recycling Industries convention in Orlando, Florida.
He said he expects market participants will continue using NASAAC to price their contracts for some time.
"The industry has to collectively say it's not going to work and have a standoff," he added.
NASAAC-based pricing has come under pressure in the last year, with many industry players saying it is no longer a true barometer of the current market. The lack of correlation between the cost of scrap and NASAAC prices has led many secondary producers to discontinue the use of NASAAC-based formula pricing. Some NASAAC contracts still remain, however, as some original equipment manufacturers are resistant to the change.
Lack of correlation between the cost of scrap and NASAAC prices has led many secondary producers to discontinue the use of NASAAC-based formula pricing. Some NASAAC contracts still remain, however, as some original equipment manufacturers are resistant to the change.
"The price of raw materials and the price of NASAAC are very disassociated," Dick said.
Joe Pickard, chief economist and director of commodities for ISRI, added that there has been a divergence in prices on the LME and NASAAC beginning last year, after the two had trended together since NASAAC's creation in 2002.
Dick said the reason for this divide was because NASAAC material is a commodity that's not very widely traded, and there is a disassociation between that product as a raw material and what is actually used by the automotive industry and other consumers.
Prestige Economics president and chief economist Jason Schenker said that when prices diverge after trending together for some time, they normally end up reconverging, which is what he predicted would happen with NASAAC prices.
The panel of speakers also reiterated what many in the market have been saying for weeks: scrap supply is tight.
Shencker said that general economic indicators in the US "look pretty good, but 'hey, dude, where's my scrap?'".
He was optimistic that conditions would change, though, adding that more manufacturing moving back into the US from China should mean more scrap production.
He said he expects market participants will continue using NASAAC to price their contracts for some time.
"The industry has to collectively say it's not going to work and have a standoff," he added.
NASAAC-based pricing has come under pressure in the last year, with many industry players saying it is no longer a true barometer of the current market. The lack of correlation between the cost of scrap and NASAAC prices has led many secondary producers to discontinue the use of NASAAC-based formula pricing. Some NASAAC contracts still remain, however, as some original equipment manufacturers are resistant to the change.
Lack of correlation between the cost of scrap and NASAAC prices has led many secondary producers to discontinue the use of NASAAC-based formula pricing. Some NASAAC contracts still remain, however, as some original equipment manufacturers are resistant to the change.
"The price of raw materials and the price of NASAAC are very disassociated," Dick said.
Joe Pickard, chief economist and director of commodities for ISRI, added that there has been a divergence in prices on the LME and NASAAC beginning last year, after the two had trended together since NASAAC's creation in 2002.
Dick said the reason for this divide was because NASAAC material is a commodity that's not very widely traded, and there is a disassociation between that product as a raw material and what is actually used by the automotive industry and other consumers.
Prestige Economics president and chief economist Jason Schenker said that when prices diverge after trending together for some time, they normally end up reconverging, which is what he predicted would happen with NASAAC prices.
The panel of speakers also reiterated what many in the market have been saying for weeks: scrap supply is tight.
Shencker said that general economic indicators in the US "look pretty good, but 'hey, dude, where's my scrap?'".
He was optimistic that conditions would change, though, adding that more manufacturing moving back into the US from China should mean more scrap production.
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