Aluminum scrap availability likely to remain tight - Recycling Today

DeAnne Toto, Editorial Director

The aluminum scrap market continues to be characterized bytightness, particularly within the U.S., which is likely to continue into nextyear, according to sources.

“Ifyou go back toward the end of last year, it was very different,” says RickDobkin, chief commercial officer at ShapiroMetals, headquartered in St. Louis. “There was plenty of metal outthere, and then there wasn't as much interest.”

Now, however, several new aluminum mills that will consumerecycled aluminum are coming online, a scenario that is likely to keep scraptight.

“Scrap is going to be in short supply for quite a while until wecan get our arms around better supply, whether that’s improving UBC [usedbeverage can] recycling rates from kind of the dreadful spot where they are nowor working with sortation technology to be able to sort the metal better, so iteither doesn't end up getting downcycled or getting exported,” Dobkin says.

While he says companies starting up this new melting capacityare smart and surely have a plan, he adds, “I don't think things are going toimprove as far as availability. I think we're going to be in a tight market forquite a while.”

“It was a long winter for aluminum between terminal markets,weather and slowed manufacturing,” adds Andy McKee president of SchupanMaterials Trading at Kalamazoo, Michigan-based Schupan & Sons. “Fortunately, it lookslike we have made it through.”

He’s “cautiously optimistic” about the coming months, notingthat the London Metal Exchange (LME)aluminum price was more than $2,700 per metric ton as of late May and flows ofmaterials have picked up, making “life for a processor/trader a bit moreinteresting.”

As of late May, McKee says spreads remained healthy and millswere interested in scrap, “But there are things to be concerned about; why isthe LME up?” he asks. “Is it truly demand or driven by financial tradinginterests? If it’s the latter, that could mean fragility.”

The first week of June saw the aluminum price soften along withpricing for base metals generally. As of June 7, the official LME aluminumclosing price for the three-month contract was $2,578.

“The fiery copper rally lifted the rest of the metals, withprices hitting one-to-two-year highs in the other five complexes at around thesame time as copper peaked,” writes Edward Meir in his “Monthly MarketCommentary” for London-based Marex datedJune 8, noting that most of the gains made in the week starting May 20 wererolled back over the next two weeks, with copper and aluminum each losing 2.8percent over the week of June 3.

“Despite the post-May 20th sell-off, all six base metals areroughly at or just slightly below where they were at the start of May and sothe correction arguably has yet to run its full course.”

McKee says trends regarding spreads for scrap versus theterminal market price will vary by commodity. “An item like UBC I believe willwiden, modestly, through the summer months before tightening back up in Q4,” hesays. “The same could be said for most sheet grades. I think extrusion gradeswill be flat to slightly wider as markets sort themselves out.”

He attributes the tightness in recovered aluminum availabilityto weaker manufacturing overall. “Flows into yards from peddlers is fairly flatfor us,” though he adds that retail trade is not a big piece Schupan’sbusiness, “but I would imagine it’s volatile in many markets largely driven byvolatility in steel scrap markets. I know that shredders across the country arelikely hurting as there just aren’t enough pounds out there.”

In terms of domestic demand, McKee says extruders are somewhatweaker than they were this time last year. “Sheet guys are probably a littlestronger, but I think that’s mostly driven by more participants than overallmarket demand for finished goods,” he says.

“Cansheet makers have had a remarkable run of success largely due to anoversupplied UBC market and wide spreads on that commodity. And that successhas drawn investments that are now being built, and it’s brought a lot of newinterest from processors, traders, melters, etc. So, now we are seeing thingschange because supply chains are being reestablished and folks are jockeyingfor position to meet the demands of the future market. It’s a fascinating timefor UBCs.”

Inlate 2023, Schupan announced itwas investing more than $40 million in two aluminum shredding and sortingfacilities in Kalamazoo and in Logan County, Kentucky, which is near several ofits large consuming customers.

The100,000-square-foot facility in Kalamazoo uses shredding and sorting technologyto prepare lower grades of obsolete aluminum scrap to supply billet makers andcoil producers, while the Kentucky plant focuses on preparing UBCs. The siteshave 100 million pounds of output combined, primarily in the form of6,000-series extrusion scrap, 3,000-series scrap for sheet mills and UBCs.

“Ourfacility in Michigan is fully operational, and we are quite pleased with theprogress made thus far, both in terms of consumers' needs we are able to meetand the suppliers we are building out to support our efforts,” McKee says ofthese investments.

Headds that a few operations-related hiccups delayed the opening of the Kentuckyfacility, though that site is fully operational as of late May.

“It sits on 90 acres in Logan County, Kentucky, and its primarypurpose is to process UBC that is not able to go mill direct today,” hecontinues. “We clean UBC that ranges anywhere from 5 to 30 percentcontamination levels.

“That plant being so close to our customer base presents a lotof exciting opportunities for the future. Schupan is very proud of both plantsand proud of the investments we made to meet the needs of the futuremarketplace.”