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Aleris hurt by narrowing spreads in 4th qtr.

Keywords: Tags  Aleris, aluminum, scrap, scrap spreads, Steven Demetriou, Nathan Laliberte


NEW YORK — Narrowing scrap spreads have continued to negatively impact Aleris International Inc.’s North American rolled product margins, executives said, citing weak London Metal Exchange prices and historically high U.S. Midwest aluminum premiums.

The Cleveland-based company has not seen prices for rolled products move in step with spiking Midwest premiums, Aleris chairman and chief executive officer Steven J. Demetriou noted during an earnings conference call March 10. “We have not seen a penny-for-penny impact based on (higher) premiums,” he added.

AMM’s spot P1020 premium slipped to 18.75 to 19 cents per pound March 5 from 19 to 19.5 cents previously. The dip follows a record run-up over the past three months, with premiums jumping about 65 percent since the start of the year (amm.com, Jan. 16).

The company’s Recycling and Specification Alloys North America segment posted adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of $14.8 million in the fourth quarter, up 12.1 percent from $13.2 million in the comparable period a year earlier.

Segment income was positively impacted by productivity gains related to furnace and scrap optimization initiatives, but was offset by inflation in labor costs and higher repair and maintenance spending, Aleris said.

The first-quarter outlook remains muted, with Aleris expecting lower LME prices to “keep pressure on scrap and metal spreads,” it said.

The cash primary aluminum contract ended the LME’s official session at $1,715 per tonne (77.8 cents per pound) March 10, a decline of 9.5 percent from $1,895.50 per tonne (86 cents per pound) March 11, 2013.

While a "difficult North American winter is expected to have a negative impact on volume and scrap availability in the first quarter of 2014" and will continue to affect "production, logistics, and demand" across most product lines, the company generally remains upbeat on 2014 (amm.com, March 10).

Aleris swung to a full-year 2013 net loss of $37.1 million in contrast to year-earlier net income of $107.5 million (amm.com, March 10).


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