LONDON U.K. secondary aluminum producers are preparing for a difficult scrap market in 2014, with tightness expected across international markets and no expectations of lower prices to come.
"Scrap will be an issue next year. Were trying to maintain sensible stock levels until the new year, but when we come back (after the holidays) it will be tight," one producer said. "At the moment I can buy what I want, but if I try and push prices down I dont get it."
While some material is hidden from the market by dealers that are holding it back in anticipation of higher prices to come, it isnt enough to cover the expected shortfall across global markets next year.
"I went to 13 yards yesterday and 40 last week, and Im only just scraping together the tonnages I need," one scrap dealer told AMM sister publication Metal Bulletin. "I have inquiries from Europe, but I cant offer anything. There is not 1,000 tonnes available anywhere."
Inquiries from Europe for scrap and ingot rose this week after some relief on exchange rates, which had rendered European prices uncompetitive over the past several weeks.
"The euro has been a big help this week, and there are now tonnages going into Europe on the back of that exchange-rate move," a second producer said.
"We sold a 25-tonne (ingot) deal into Europe and it was a lot more lucrative than it would have been 10 days ago," a third producer said.
The U.K. spot market for secondary aluminum ingot was quiet this week, with most producers focusing on contracted business for the fourth quarter until consumers are ready to start negotiations for 2014 supply.
"Were rammed for November, but people are waiting to see what will happen for next year and are not looking to book too far forward," according to a fourth producer source.
Many producers are unable to fill the spot orders that are coming in from Europe because they cannot find the necessary amount of available scrap metal.
"The biggest problem is the squeeze on scrap. I could have sold three times as much volume but scrap prices are too high," a fifth producer said.
A diecaster added that he expects his business volumes to grow 20 percent next year.
Such growth will only exacerbate the scrap situation for secondary aluminum producers.
A version of this article was first published in AMM sister publication Metal Bulletin.