NEW YORK As the die casting industry continues to scrutinize the North American special aluminum alloy contract (Nasaac), major domestic A380 alloy producers have informed consumers and suppliers they are unlikely to use the contract again, a top executive at Metal Conversions Ltd. said at AMMs Aluminum Summit in New York.
"Weve seen the commoditization of 380," said Rob Carey, president and principal of the Mansfield, Ohio-based company.
"At first, in 2003, I supported the (Nasaac) contract," he said, but the contract no longer reflects the actual market, he said.
Carey isnt the only industry player to express discontent with what he has called a "failed contract" (amm.com, Oct. 9). Major alloy producer Aleris International Inc. said in October it was planning to discontinue using pricing formulas based off the contract in favor of measurements that correspond more closely with its scrap purchasing costs (amm.com, Oct. 9); a few months later, the North American Die Casting Association (Nadca) filed a complaint with the London Metal Exchange claiming "significant issues with the effectiveness" of its Nasaac contract (amm.com, April 30).
As a result of what he called Nasaacs ineffectiveness, cast alloy producers no longer have the ability to hedge their products, Carey said.
"Its no big deal; weve always been risky," Carey added. "It looks like the secondaries will not support the Nasaac contract. Every secondary that has authorized me to say this for them ... is never going to use it again."
Nadca and the LME had a telephone meeting last month to discuss the contract and possible changes that could restore users faith in it (amm.com, May 22), but Carey said even the adoption of Nadcas recommendations might not be enough to reinstate the industrys support of the tool.
"If this contract and the die casters can get it back to some semblance of stability, it will be two to three years before the secondaries have any trust for the contract," he said.
In spite of the Nasaacs ongoing problems, demand for cast alloys has never been stronger, Carey said.
"Those of us that produce for the automotive industry, which is mainly the cast alloy producers, have no fears," he said. "The strategic importance of the automobile far trumps painted siding, UBCs (used beverage cans) and aluminum window frames. I really have no concerns for the cast aluminum industry."
"Right now, there are approximately 15 million cars being recycled every year, which is generating in the vicinity about 3 million pounds of zorba. A lot of that is going export, but we can keep those units in this country anytime buyers want it. The drive for scrap is going to drive all of the margins closer to P1020. Its inevitable," he added.
Carey concluded by saying that effective scrap purchasing is the key to long-term success in the industry.
"For us, scrap buying is the keythe only keyto making money in the aluminum recycling industry," he said. "Whether you are a cast alloy producer, a mill recycler, an extruder recycler, a die cast recycler, its all about efficient purchasing. This is where everybody is beginning to lose it. I have a great respect for MBAs, but MBAs cannot establish rapports with scrap dealers."