NEW YORK A decline in the
price of the London Metal Exchanges cash North American
special aluminum alloy contract (Nasaac) has prompted some
domestic alloy producers and die casters to once again
re-evaluate the legitimacy of the contract, sources said.
Nasaac plummeted to its lowest
level in nearly three and a half years April 15, closing at
$1,741 per tonne (79 cents per pound), down 13.7 percent from
$2,017 per tonne (91.5 cents per pound) a year ago.
"Some of the big OEMs (original
equipment manufacturers) like to use itthey want to use
it as a formulabut its not a very functional
formula for producers," Alan Dick, president of Los
Angeles-based Alpert & Alpert Iron & Metal Inc., said
in a speech at the Institute of Scrap Recycling
Industries annual convention last week. "Theres a
lot of risk involved, and because theres such a
disassociation between the prices of raw materials and the
price of Nasaac itself, it becomes very risky for producers to
sell on any sort of long-term basis."
Others indicated that companies
that secured contract business based on published Nasaac prices
were consistently losing money. "Those guys are really hurting
right now," one alloy producer source told AMM. "There
is absolutely no correlation between the contract price and
actual materials. At this point, we would never do a contract
based on Nasaac; its really not a smart idea."
"The Fords and GMs of the world
still require suppliers to have contracts based on Nasaac," a
second producer source said. "Any die caster that is making
parts for those guys is struggling. Something has to change, or
the die casters will go out of business."
Several sources told
AMM that domestic automakers have been unwilling to
renegotiate Nasaac-based contracts. "People in the industry
understand that we are not going to be around if we keep our
contract business off of Nasaac," a third producer source said.
"The auto manufacturers are not amenable to changing the
contract, even if they know we are losing tons of money.
Consequently, we will no longer be able to do business with the
"Historical formulas relative to
Nasaac are going to have to change," Dick told the ISR
convention. "Whether Nasaac ultimately goes away, its
only going to happen when the industry collectively says,
This doesnt work. And then well have a
stand-off and see what happens from there."