NEW YORK Secondary
aluminum alloy producers are cautiously optimistic about the
possibility of increased automotive demand to replace cars
destroyed by Hurricane Sandy, while scrap traders say it will
take a while for any impact on shredded flows and pricing.
One alloy producer contacted by
AMM said he expected automotive companies to boost
their aluminum consumption in an effort to avoid "going short
on inventory" as production increases.
"I think its a big deal
for the secondary aluminum business. If you sell more cars, you
have to produce more, and theyll sell more in the next 60
days. ... We should have an increase in production, which will
increase the price of aluminum sometime in December," he
"I dont know that the
turnover would be that fast," a second alloy producer said,
noting "a couple of automotive contracts." "Maybe its
something well see in the first quarter of 2013."
However, other alloy producers
were less bullish, saying that they have yet to receive any
firm indications from the automotive sector on whether
theyll see an increase in production induced by
"I havent seen the car
guys asking us for extra metal. Theyll make that call
about a week in advance, and well do the same," a third
A fourth producer noted that
while his company has experienced atypically strong demand from
its automotive customers for December, he doesnt believe
it can be directly attributed to Sandy.
"All the business we have
selling to auto companies in December is as full a month as any
other month, and thats unusual, because they all want
their metal in by the 21st (of December)," he said, adding that
he believes it will take another three to six months before a
car replacement trend kicks in, if at all.
"Nobody is going to buy new cars
until everything is fixed," he said. "Even if you did have it
insured, when is the check going to come?"
Meanwhile, aluminum scrap
traders said that twitch prices could begin to decline with an
influx of junked cars on the East Coast, though they were
divided as to when this effect might come about.
"Theyre going to hit the
shredders rather fast, so we might see twitch prices go down,"
one scrap buyer said.
"By the time you put it through
and turn it around, it will take 60 to 90 days," one broker
said. "With shreds, the tightness weve been experiencing
could ease, and maybe the smelters will be able to make some
Traders were also unsure as to
whether the surplus of material would make its way to domestic
"A lot of the East Coast shred
may go into export. ... It will depend if shredders choose to
sit on the car or shred it right away. If they do shred an
extra 250,000 cars all at one time, thats a lot of extra
zorba," a second scrap buyer said.
"The feedstock for car shredders
has been really competitive, so thatll all get snapped up
by the shredders up north," a third scrap buyer added.