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Aluminum alloys swing higher on Nasaac spike

Keywords: Tags  aluminum secondary alloy, A380, North American special aluminum alloy contract, Nasaac, London Metal Exchange, LME, A380.1, A360.1 A413.1

NEW YORK — Secondary aluminum alloy prices jumped May 22 following an unexpected rise in London Metal Exchange contract prices for North American secondary alloy.

More than a year after sparse trading on the LME’s North American special aluminum alloy contract (Nasaac) resulted in it losing favor among market participants, alloy makers switched gears as the spot Nasaac price jumped 3.5 cents per pound from May 19.

The jump to $1.02 per pound May 22 meant alloy producers could sell A380.1 alloy into an LME warehouse for around $1.06 per pound after factoring average warehouse incentives, with cash paid on delivery and not after 30 days as is common practice in the free market.

"This puts the street A380 price at at least $1.08 per pound. This is the first time in the 12-year history of the Nasaac that it is actually acting like a ‘real’ terminal market—i.e., contract price rising in an effort to draw metal into warehouses as warehouse stocks are falling," one producer source said.

With three-month Nasaac prices trending above spot prices, alloy makers raised free-market offers to $1.08 to $1.11 per pound, although consuming die casters were able to secure A380.1 in a range of $1.06 to $1.07 per pound May 22, up 2 cents from $1.04 to $1.06 per pound May 19.

Market participants offered varied views on why Nasaac prices are soaring.

"We have seen an increase in demand from die casters that were subsidizing their metal needs with Nasaac production that is pushing prices higher on 380. Nasaac prices are up because inventory continues to fall and the liquidity of the contract is terrible," a second producer source said. "Nasaac has driven the prices down for the last two years, and we have been waiting for the reversal or for the contract to just go away."

Other alloy makers said that a stronger Nasaac was just one of many factors driving free-market secondary alloy prices.

"I’m at $1.09 (per pound) on 380. Silicon is over $1.40 per pound and transportation costs are through the roof. If folks are happy at $1.05 (per pound), all I can say is more power to them," a third producer source said.

A fourth producer echoed the sentiment. "I have been and will continue to quote and sell at the $1.08 (per pound) level. I know there are brokers and traders selling below that, but I don’t consider them my competition," he said. "If you add the drama surrounding the Nasaac, I don’t understand why anyone would sell below $1.06 or $1.07 (per pound)."

A suddenly attractive Nasaac market also helped prop up prices for other alloys such as 319.1, which inched a penny higher to $1.09 to $1.11 per pound, while low-copper alloys such as A360.1 and A413.1 also gained a penny.

"Nasaac is in play again and driving 380 prices up, which will move other alloys up as producers shift from making 319, 356 and 413 to making 380. This might be the start of a significant run up since Nasaac warrants have gone from a high of 245 million pounds to 40 million pounds," a fifth producer source said.

A sixth producer source said that a fundamental shift was occurring in the market. "We have had several calls for 380 quotations today. I believe the jump in Nasaac pricing and the slightly stronger primary situation is propping up 380 and other secondary alloys. Time of course will tell if momentum has swung back to the upside or we are experiencing a dead cat bounce," he said.

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