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Supply crimp buoys aluminum scrap

Keywords: Tags  aluminum scrap, scrap prices, LME, London Metal Exchange, winter weather, Midwest premiums, shipping, YRC Freight J.B. Hunt

NEW YORK — Secondary aluminum smelters’ scrap prices were mostly steady Feb. 3 despite aluminum’s drop to a more than four-and-a-half-year low on the London Metal Exchange, as market players braced for restricted scrap flows due to continued winter weather conditions across much of the eastern half of the country.

The three-month LME aluminum contract ended the official session Feb. 3 at $1,701.50 per tonne (77.2 cents per pound), down 1.6 percent from $1,729.50 per tonne (78.4 cents per pound) Jan. 30. The contract fell further to $1,686.50 per tonne (76.5 cents per pound) Feb. 4, the lowest level since hitting $1,658 per tonne (75.2 cents per pound) July 16, 2009.

Heavy snow and freezing rain is forecast to descend on much of the central United States over the next 24 hours, moving from the Plains into the Ohio Valley, according to the National Weather Service. As the system continues to move east, colder temperatures and heavy snow will impact locations in the Northeast starting Feb. 5. In addition to the winter weather, heavy rainfall could result in flooding across the Tennessee and Ohio Valleys, according to a Feb. 4 update on the agency's website.

As a result, several major trucking companies have posted notices announcing reduced service to areas impacted by the weather. Overland Park, Kan.-based YRC Freight Inc. told customers that several shipping routes, including Denver to Kansas and Denver to Oklahoma City, would be shut down as of Feb. 4. "Additional routes will be closed throughout Tuesday into Wednesday," YRC said on its website.

Other major transportation companies noted that prolonged winter weather had dramatically disrupted the flow of material. "Shipping patterns have shifted across the industry and there has been a significant impact to truckload services, drayage capacity, dedicated services, home delivery services and brokerage capacity," J.B. Hunt Transport Inc., Lowell, Ark., said on its website.

Several aluminum scrap buyers echoed shipping companies’ concerns. "It will be interesting to see if the weather systems coming across the Midwest this week will cause even more trucking difficulties," one used beverage can (UBC) buyer said via e-mail. He hadn’t lowered price quotes in step with drops on the LME, largely because material had become very challenging to acquire, he said.

"The winter weather has definitely impacted truck routes and also created volume surges in areas hardest hit following the series of recent storms. We have seen an impact where we rely on backhauling carriers to certain areas, particularly North to South shipments. We have responded by securing more commitments from locally domiciled carriers, around our major shipping customers, as opposed to relying on backhaul capacity. We’re also making a concerted effort to retain truck capacity within our client network as opposed to relying on spot capacity coming from other sources," Gregory Burns, chairman, president and chief executive officer of Cranberry Township, Pa.-based PLS Logistics Services Inc., said via e-mail.

In addition to the weather, elevated U.S. spot aluminum premiums were helping to keep scrap prices at inflated levels.

AMM’s spot P1020 premium moved to 20.75 to 21 cents per pound Jan. 29 (, Jan. 30). At the start of last month, it stood at 11.5 to 12 cents per pound.

It’s an "interesting aluminum world right now," one scrap seller said. "We are getting the same quotes at $1,686.50 three-month LME as we did when it was $1,758."

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