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Aluminum alloys prices shrug off Nasaac drop

Keywords: Tags  nonferrous, aluminum, scrap, alloy, A380.1, North American special aluminum alloy contract, Nasaac, London Metal Exchange LME


NEW YORK — A steady aluminum scrap market will prevent secondary aluminum alloy makers from lowering ingot prices, despite a dramatic drop in terminal exchanges over the past month.

Market participants said they expect that a 9-percent decline in the London Metal Exchange’s North American special aluminum alloy contract (Nasaac) cash prices from July 1 to Aug. 1 will have no real impact on free-market prices of A380.1 and other secondary aluminum alloys due to raw material costs.

Nasaac metal and A380.1 alloy have very similar specifications, and despite Nasaac cash prices falling to $2,355.50 per tonne ($1.07 per pound) Aug. 1, down 9.5 cents per pound from July 1, free-market A380.1 tags have slipped just one penny to a range of $1.10 to $1.12 per pound from $1.11 to $1.13 during the same time frame.

Alloy makers and traders said the minimal weakness in A380.1 prices is due to the absence of any meaningful weakness in aluminum scrap prices and high silicon prices.

Scrap suppliers and consumers said prices for twitch, a nonferrous shred that is a critical raw material in A380.1 production, have slipped just one penny to a range of 80 to 82 cents per pound this past week from 81 to 83 cents at the beginning of July.

Other key scrap grades, such as old sheet, increased one penny to trade at 71 to 73 cents per pound, while old cast prices remained at 74 to 76 cents per pound through July, market participants said.

In addition, spot market offers of $1.50 per pound for silicon this past week, up from an early July range of $1.40 to $1.44 per pound, have meant potentially additional alloying cost for producers.

"Everybody is busy—completely sold out for August—and in no mood to cut prices with some scrap prices still expensive and in particular silicon prices, regardless of Nasaac," an executive at one secondary alloy company said.

Strong demand for secondary aluminum alloys from most consuming sectors is another reason producers see no reason to lower prices.

Apart from a busy auto sector, producers reported stellar demand from manufacturers of electrical and hand tools, lawn mowers, small engines, recreational vehicles and housing appliances/products, among others.

Demand for finished product with no relief from raw material costs makes the Nasaac redundant, an executive at a second alloy maker said.

"The weaker Nasaac is allowing the traditional 380 Nasaac die casters who use Nasaac to buy Nasaac again. But with the rent, storage, outcharges, upcharges and wait times, Nasaac is still no bargain today if you can get it," a third executive at a secondary alloy maker said. "Because the Nasaac went up fast and then fell fast, a lot of the units that were sold into the LME have since been bought back as paper and will not be delivered into the warehouses. What this means is that as soon as the limited amount of available Nasaac dries up again, Nasaac pricing will also move up again as original equipment manufacturers (OEMs) look to cover 2015."

However, one market participant said he expects some companies to follow the Nasaac. "Our business is strong. The aluminum foundry alloy business has no price discipline, but that is not new," he said. "There appears to be some margins developing, but the idea of being profitable is simply too much for some people. Lower your price and get more business with lower or no margins. This is not our approach, and explains why we stay in business."


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