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Aluminum deox prices sink

Keywords: Tags  Deoxidized aluminum, deox, A380.1, 319.1, secondary aluminum alloy, ArcelorMittal USA, Nathan Laliberte

NEW YORK — Prices for deoxidized aluminum, or deox, have fallen sharply, with participants saying that a few sellers are consistently undercutting the entire market.

Transaction prices fell to a range of 90.5 to 92 cents per pound by the end of September, down from 94 to 97 cents in the middle of the month.

Several sellers reported exiting the market entirely once sales dipped below 94 cents per pound. "We pulled back and did not sell into that kind of market," one seller told AMM. "These guys think cash flow is more important than making money." Scrap is still tight, but "there are still sellers out there dropping their pants. I don’t get it."

Others said that the introduction of an electronic auction by Chicago-based steelmaker ArcelorMittal USA LLC was inciting intense price competition among deox sellers.

A second seller said he heard that one company sold a load of deox to ArcelorMittal at 91.5 cents per pound in the middle of the month. "It’s turning into eBay for metal," he said. "There is no relationship. Unfortunately, there are no other options at this point. People have to make sales to keep things running."

ArcelorMittal’s auction format is designed as a reverse auction—a style of price negotiation where suppliers, not consumers, place quotes online. Sellers then receive feedback on their current position and can adjust bids to the level of competition, according to several auction participants.

"We have to participate whether we like it or not," the second seller said. "Arcelor is just too big of a player in the deox market."

Eventually, sellers operating on negative margins will have to adjust their business practices, a third seller said. "These people don’t understand the big picture; it’s desperate selling and it hurts them and the entire industry."

The formula for manufacturing deox is not entirely dissimilar to that of A380.1 or 319.1, a fourth seller said. "Look at the price of A380 or 319.1," he said. "You use relatively the same scrap for deox, minus the copper and silicon, which at most will add about 5 cents to your cost. I am baffled beyond reason why someone would sell below 95 cents per pound. Somebody’s got to go belly up here."

Most buyers and sellers of secondary aluminum alloy pegged A380.1 at $1.02 to $1.03 per pound and 319.1 at $1.07 to $1.09 per pound Oct. 3, unchanged from two weeks earlier.

A fifth seller said he had set prices at between 94 and 95 cents per pound and was unable to participate after mid-September. "I guess some guys had some serious inventory and had to move product," he said. "Obviously, those type of sales are a loss any way you slice it."

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