Tight scrap supply keeps Russian AK5M2 aluminum prices high

Russian AK5M2 aluminum prices have stayed supported at $2,000/mt for the past six months, as slowing car sales have led to fewer cars getting dismantled, generating less scrap supplies, Japanese market sources said Tuesday.

This week, AK5M2 -- melted aluminum scrap used as ADC12 aluminum alloy feedstock -- was offered at $2,080-2,090/mt CFR Japan for loading in late September to October, Japanese traders said. The offers were for 1% zinc and 0.5% magnesium material, the most common specification.

One Japanese secondary aluminum smelter source said the lowest offer was $2,020-2,040/mt CFR Japan for 1% zinc and 0.85% magnesium material.

AK5M2 prices typically fall during the third quarter, as scrap supplies increase compared with the first quarter when the Russian scrap yards become nonoperational under heavy snow. A year ago, AK5M2 offers for 1.0% zinc and 0.5% magnesium material hovered around $1,860-1,870/mt CFR Japan.

This year, the prices have stayed above $2,000/mt even in the third quarter.

""There was one time about a month ago when I saw an offer below $2,000/mt [CFR], but that was just for a brief moment,"" said one Japanese trader.

AK5M2 prices have been holding firm due to slowing car sales in Russia that resulted in less scrap from used vehicles, the Japanese buyers said.

Sales of passenger cars and light commercial vehicles in Russia over January-July were 1.67 million vehicles, down 6% year on year, according to Association of European Businesses data.

""There is less scrap available, and the Russian AK5M2 smelters are no longer motivated to produce,"" said the Japanese aluminum smelter source.

Demand from secondary aluminum smelters in Thailand and Indonesia is also supporting prices above $2,000/mt, Japanese sources said.

Japanese buyers said they have not purchased Russian AK5M2 for a month or so, as they have been able to find cheaper supplies in the local market.

Russian car manufacturers are hoping a new government subsidy for car purchases launched this quarter will boost car sales.

Joerg Schereiber, chairman of the Russian AEB Automobile Manufacturers Committee, said on August 8: "We can expect a gradual improvement to the point of stabilization in the coming months. The recently announced government program in support of retail-financed car purchases will be helpful in reaching this point sooner rather than later."