NEW YORK Domestic prices for secondary aluminum alloys remain unchanged even as the London Metal Exchanges cash North American special aluminum alloy contract (Nasaac) plummeted March 11 to its lowest level since June 2010, validating a growing number of producers recent decision to delink their alloy sales prices from the published Nasaac price, sources said.
"The drop on Nasaac just goes to show that its no longer a viable contract for hedging," a source at one alloy producer said. "Its supposed to be based on supply and demand, but instead has become a trading tool for finance firms. If I were a betting man, I would put money on Nasaac going up for no other reason than traders are going to be jumping in looking for quick profits."
The cash Nasaac price ended the official session March 11 at $1,781 per tonne (80.8 cents per pound), down 3.4 percent from $1,845 per tonne (83.7 cents per pound) at the end of last week, marking a return to lows last logged some two and a half years ago. Prices recovered slightly March 12, inching up to $1,810.50 per tonne (82.1 cents per pound) but still well below recent highs above $2,000 per tonne (90.7 cents per pound).
Meanwhile, secondary aluminum alloy prices in the physical market saw no parallel movement.
A380.1 held steady at $1.04 to $1.06 per pound March 11, although some sellers claimed to have made small-load sales in the $1.06- to $1.07-per-pound range. Alloy 319.1 was unchanged at the start of the week at between $1.09 and $1.11 per pound, 356.1 was steady in a range of $1.11 to $1.12 per pound, A360.1 remained at between $1.10 and $1.11 per pound and A413.1 stayed at $1.10 to $1.11 per pound.
"Scrap prices are not moving down and I am selling pretty good volumes right now," a second alloy producer source said. "I dont see my price moving down in the near future."
The growing disparity between some exchange prices and actual alloy sales prices has been an issue for some time, sources said, with aluminum alloy major Aleris International Inc. announcing in October plans to start pricing its products based on scrap input costs rather than off Nasaac-based formulas (amm.com, Oct. 9).
"Real-life supply and demand figures" and exchange prices are no longer matching up, the first producer source said this week.
Meanwhile, some mill-grade aluminum scrap prices eased slightly March 11 on the back of lower volumes and weakening exchange prices.
Prices for 5052 segregated low-copper alloy clips fell to 90 to 92 cents per pound from 91 to 93 cents on March 7, while painted siding dipped to 74 to 76 cents per pound from 75 to 77 cents. But 3105 clips held steady at 82 to 84 cents per pound and mixed lower-copper alloy clips remained in a range of 80 to 82 cents per pound.
"A lot a people are on the fence, looking at flows, and beginning to sell into the market," a mill-grade scrap buyer said. "Despite that, material is still not readily available."
The LMEs primary aluminum cash contract ended the official session March 11 at $1,895.50 per tonne (86.0 cents per pound), down 1.6 percent from $1,927 per tonne (87.4 cents pound) at the end of last week.
Despite the decline in exchange prices, buyers maintained that secondary aluminum tags continue to be buoyed by an ongoing supply crimp.
"Supply is not good and its really tough to find good material," another mill-grade scrap buyer said. "The weather is really starting to affect things. Hopefully, as spring rolls around well see things loosen up."
Meanwhile, prices for secondary smelters scrap grades were largely unchanged March 11 as sources noted steady volumes and strong demand.
The only secondary grade that showed movement was used beverage cans (UBCs), which tightened to a range of 75 to 76 cents per pound from 75 to 77 cents previously. All other secondary scrap grades were unchanged.