NEW YORK Tight scrap flows and low spreads weighed on Aleris International Inc.s first-quarter earnings, as weak prices on the London Metal Exchange continued to present significant challenges to near-term growth, company executives said on an earnings call May 9.
Chairman and chief executive officer Steven J. Demetriou said that the companys global recycling segment continued to experience negative margin pressure in the face of strong demand.
The companys Recycling and Specification Alloys North America segment recorded $10.4 million in income, down 37.7 percent from $16.7 million a year earlier.
Segment income has been affected by volatility in scrap spreads caused by lower inventory levels, Demetriou said, and a recent downturn in aluminum prices on the LME has served only to compound existing challenges.
The situation will improve with a recovery in LME aluminum prices, but the Cleveland-based company expects second-quarter metal spreads to remain relatively flat, he said.
Demetrious remarks reflect the sentiment of most scrap buyers contacted by AMM, who have indicated that a majority of scrap sellers have decided to wait on the sidelines in the hope of taking advantage of potential recoveries on the LME.
The aluminum cash price closed the LMEs official session at $1,864.5 per tonne (84.6 cents per pound) May 9, down 6.1 percent from $1,987 per tonne (90.1 cents per pound) 12 months prior.