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Aleris discontinuing use of Nasaac as price tool

INDIANAPOLIS — Aleris International Inc. will discontinue using pricing formulas based on the London Metal Exchange’s North American special aluminum alloy contract (Nasaac) in favor of measurements that correspond more closely with its scrap purchasing costs.

The Beachwood, Ohio-based aluminum company said Tuesday that it "will no longer supply multi-month pricing mechanisms that utilize the Nasaac index as a basis for 2013 pricing."

"Aleris is opting to use other indices and mechanisms that provide a better and closer correlation to the cost of aluminum scrap used in the products it offers to its specification alloy and recycling customers," the company said, declining to elaborate.

Several attendees at the North American Die Casting Association Congress and Exposition in Indianapolis told AMM on Tuesday that they were pleased with the move.

"It’s good news to me. Nasaac is the most inaccurate and manipulated metal market out there. We are extremely excited when we can buy ingot at 7 cents over the published Nasaac price," one die caster said.

One broker said that both alloy producers and die casters have reported dissatisfaction with Nasaac, but that they are often forced to use it in order to do business with major automotive consumers.

An alloy producer agreed that the contract no longer made much sense and told AMM that his company would only continue to use Nasaac as a basis for pricing in tandem with pricing assessments such as those published in AMM. A second alloy producer, whose company only has one contract currently based on Nasaac, said his company also would not use it as a basis again next year.

The cash Nasaac price traded at $2,015 per tonne (91 cents per pound) in the LME’s official session Tuesday compared with AMM’s A380.1 price of $1.03 to $1.05 per pound.

Aleris’ move may not come as a surprise to many industry players, as rumors have been circulating for some time that a shift away from Nasaac-based pricing might be in the works.

Alloy producers have been critical of the Nasaac contract all year, saying that the LME price is more commonly affected by macroeconomic factors rather than the availability and cost of scrap.

Several producers told AMM at last month’s ISRI Commodities Roundtable Forum in Chicago that they would avoid using Nasaac in 2013 contracts (amm.com, Sept. 14). Producers at June’s second annual Aluminum Summit in New York, hosted by AMM, were also unified in their dissatisfaction with Nasaac and said they have been progressively phasing it out of their pricing (amm.com, June 12).

"It’s just a bad tool. We all wanted a contract that worked. We were excited about it; we thought it would give us a tool to hedge forward sales. But it has become dysfunctional," Bryan Beck, vice president of Mayfield Heights, Ohio-based Beck Aluminum Corp., said at the time.

Rob Carey, president and a founding partner of Metal Conversions Ltd., Mansfield, Ohio., has also publicly pushed for a shift, calling Nasaac "a failed contract that cannot be put right."

"In today’s environment, none of the scrap used to produce 380.1 is purchased against a Nasaac formula. I find confirmation in the fact that almost all of the Tier 1 and automotive consumers want published numbers, not Nasaac, as the contractual basis for outgoing scrap," Carey wrote in an opinion piece on AMM’s new online forum, AMM Inner Circle. "Given this situation, it is quite logical that producers unable to hedge raw material and having lost control of pricing will stop participating in the contract."

The LME declined to comment.


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