Tight profit margin causes secondary aluminum output cuts

Bermco Aluminum has idled production capacity at its secondary aluminum smelter, while Imperial Alloys Corp. is coming off a reduced production schedule.

Both companies cited tight profit margins caused by a decoupling of scrap purchasing prices and alloy sales tags for their decisions.

Birmingham, Ala.-based Bermco has idled a furnace representing some 5 million to 6 million pounds of monthly production, or roughly one-quarter of the site’s total capacity, head of sales Bob Hollabaugh said, adding that the company still has two other furnaces running.

Bermco will consider restarting the idled furnace "if things pick up" in the fourth quarter, Hollabaugh said.

Old sheet is currently trading at 66 to 68 cents per pound, while A380.1 is at 98 cents to $1 per pound.

Alloy producers for the past few months have complained of their struggle to make a margin on sales, with the price of scrap falling in line with that of A380.1, which was at $1.11 to $1.12 per pound on March 7.

"If you’re willing to pay the price, you can buy," Hollabaugh said. "But you’d pay more for the scrap than you’d get for selling the alloy.

Meanwhile, Imperial vice president of sales Aaron Stankewicz confirmed that the Angola, Ind.-based company recently removed weekend shifts at its Minerva, Ohio, facility, reducing production by 2 million pounds. But those shifts are being brought back this weekend as the company returns to a seven-day production schedule.

Market sources said it is unclear whether reduced production capacity across the industry will cause alloy prices to rise. "I’m not sure that taking this kind (of) tonnage out of the market will have any impact," Hollabaugh said. "Once you create a shortage of something, the price goes up," one alloy producer said. "I could see the price of A380.1 hitting $1.10 by November. But taking out 10 percent of production doesn’t necessarily mean the price goes up 10 percent."