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Secondary alloy prices hold ground

Keywords: Tags  aluminum scrap, aluminum alloy, scrap prices, LME, Nasaac, Sean Davidson

NEW YORK — Strong demand from the auto and housing sectors has kept secondary aluminum values on the raw material and finished product side afloat despite continuing weakness in terminal markets.

A 2-cent-per-pound swing in primary aluminum prices on the London Metal Exchange had little impact on obsolete aluminum scrap consumed by alloy makers, who in turn fought to keep alloy prices unchanged.

A weaker LME has had minimal impact on scrap prices over the past few weeks as obsolete scrap flows remain tight due to cold weather conditions and weaker pricing in many parts of the country, market participants said.

Most alloy makers said A380.1 alloy continued to trade at $1.04 to $1.05 per pound March 18, unchanged from March 14, although at least two sources reported numbers that were up to a penny per pound higher.

The three-month North American special aluminum alloy contract (Nasaac) closed at 83.7 cents March 19, up from 83.5 cents March 14.

"(We are) still quoting and selling small volumes at $1.06. I plan on holding out until scrap gets cheaper or the lack of margins curtails my competition’s volumes. Still think something must give. Demand is still excellent from contract customers. Spot buyers seem to be keeping purchases tight (and are) not holding excess inventory," a source at an alloy maker said.

Every producer contacted by AMM said demand remains strong, but one source said volumes slipped a little March 18 as some customers awaited more direction from the terminal markets.

"I think some people are holding off as they feel the market is going to drop, which is usually the case in spring," he said.

Alloy demand from durable goods manufacturers has also improved, some sources said.

Because A380.1 free-market alloy is similar to the specification for Nasaac metal in LME warehouses, a weaker Nasaac has brought some warehouse metal into the open market, one source said.

Many producers said they have chosen not to fight for that business, with one saying it had shifted focus to 319.1 alloy production, which is in tight supply.

"Margin is going to be the name of the game this year. I know that we are not going to take anymore low-/no-profit business. Obviously the 98-cent sales (for A380.1) are not from secondaries, but people are pleading with us to try and produce at that level or face bankruptcy. There is nothing we can do but not sell them and watch as they slide into oblivion," he said.

Sources at most alloy makers said 356.1 alloy prices remained flat at $1.11 to $1.12 per pound, although one seller disputed that level.

"Today, with the lower primary prices, most distributors can purchase A356 (primary metal) at $1.08 or $1.09 per pound delivered (for Russian metal). Domestic is a penny or two more. Why would anyone wish to spend $1.11 to $1.12 on (secondary 356.1)?" he asked.

A strong market for finished products created some anomalies in industrial aluminum scrap tags as consumers chased some grades more than others.

Primary scrap tags, which typically trend in step with the LME, parted ways March 18 despite some weakening in primary aluminum prices.

Segregated 3105 low copper alloy clips dropped to 81 and 83 cents per pound March 18, down 2 cents from March 14, while 5052 clips fell a penny to 90 to 92 cents per pound.

Meanwhile, mill-grade mixed low copper clips were flat at 80 to 82 cents, while painted siding inched up to 75 to 77 cents from 75 to 76 cents previously.

"Scrap supply remains tight and the lower LME values are not translating into lower scrap values, just more tightness on supply as dealers hold out for the price they want," a producer’s scrap buyer said.

One supplier said scrap flows have dropped significantly into dealer yards. "Scrap (volume) is ... down month over month by approximately 10 to 13 percent. Year over year it’s down by approximately 18 to 24 percent," he said. "Consumer demand is strong from both a secondary and mill basis. We are seeing secondary prices starting to eclipse mill prices in certain grades and pull volume from the flat-rolled products area."

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