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Secondary alloy prices flat but could rise

Keywords: Tags  aluminum, scrap, secondary aluminum alloy, scrap prices, A380.1, LME, Nasaac, Sean Davidson

NEW YORK — Secondary aluminum alloy prices could gain some ground if terminal markets continue to strengthen as demand for alloy remains healthy, according to market participants.

Free-market alloy prices were unchanged July 1 compared with transactions recorded late last week, but several alloy makers said offers had already improved.

Most offer prices for A380.1 were reported at $1.03 to $1.05 per pound, with two sources noting small-volume sales at $1.03 per pound. For the most part, A380.1 continued to trade at $1.01 to $1.02 per pound July 1, according to buyers and sellers, with the latter pushing to raise prices.

"There seems to be a bounce in the market. We moved a truckload of 380 at $1.03. The jump in the London Metal Exchange ... should help also," one producer said.

The three-month North American special aluminum alloy contract (Nasaac) settled July 2 at $1,905 per tonne (86.4 cents per pound), up 1.3 percent from $1,880 per tonne (85.3 cents per pound) June 27.

"Demand has been very strong. In fact, we are working the July 4 holiday. Certainly automotive is strong and scrap has been getting tighter, which drives prices up. I don’t think (scrap) flow is very good. Even our own yards have slower flows currently," a second producer said.

Demand remains fair, with most consumers still following a just-in-time model, where "everyone waits until the last minute," one alloy trader said. "This happens when consumers feel the market will go down. Hence, we try to keep inventories low but cannot. You will see someone run out of something in July."

The market should improve in the next two to five weeks following the holidays and planned shutdowns, he said. "Shipments will improve as long as the economy does not falter. We do not need a booming economy. Just keep growing. Next thing you know: prosperity."

Alloy prices should already be higher, a source at a third producer said, expressing dismay at the current transaction ranges.

"We’re quoting 380 at $1.04. Volumes are still very strong and shipments in July will be just about the best ever. The Nasaac has been moving upward over the last month or so and I believe we’re entitled to move upward also," he said.

The third producer source said Nasaac will continue to influence the market.

"What would you say influences the price then? Supply and demand? Traders with no overhead selling under the market? Just who sets the price anyway?" he asked.

"(It) seems as though the most willing to sell are the operations that need to pick away at the business that is usually supported by someone at a higher price. Those of us that are selling a package and get some value for their product are constantly battling the gnats. Human nature. It’s pretty sad when we have to try to justify why we’re able to sell at a price a little higher than lower-level traders or operations that don’t have the infrastructure that better mainstream smelters have," he said. "Am I trying to support pricing at a higher level than most? Darn right I am. Last time I checked, I believe it’s OK to be profitable and make sure the ownership gets a return on their investment."

A seller for a fourth producer that sells most of its alloy on contract deals said he would quote A380.1 at $1.05 per pound and 319.1 at $1.12 per pound despite the market trading a few cents below that range.

"The lower prices are not justified given where scrap prices are," he said.

Obsolete aluminum scrap prices were unchanged July 1 despite a slight uptick in primary aluminum prices, while those for prime scrap and used beverage containers that are typically priced directly as a percentage of or dollar spread to LME levels strengthened by a penny in direct correlation to the LME uptick.

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