Aluminum alloy makers preparing to cut output

NEW YORK — Producers of secondary aluminum alloys are preparing for production cutbacks, namely for spot A380.1 material, as shrinking margins and high scrap prices continue to create unfavorable conditions, sources say.

“We are no longer selling as much 380 as we used to, largely because of tight margins,” one alloy producer said. “Instead of selling at an unfavorable price, we simply won’t sell it. We’re hoping that scrap will come off slightly once the weather turns a little warmer and supplies come back. At this point, we are focusing on other alloys that will make us money. I know other producers are taking a similar route.”

“As the market has come in, we have been holding our 380 price at $1.06 (per pound) firm—which basically means we are not selling anything,” a second alloy producer said. “I have no idea how people are selling at $1.04 (per pound) and making any money. They are probably just fulfilling contracts, maintaining relationships, knowing they will lose money.”

One supplier said he plans to hold his existing A380.1 supply until prices increase. “If we get our number, we get it. If not, we will wait,” he said. “It’s definitely frustrating to see terminal markets weaken and scrap prices remain high. There is nothing we can do at this point.”

The London Metal Exchange’s cash North American special aluminum alloy contract (Nasaac) recovered to $1,820 per tonne (82.5 cents per pound) in the LME’s official session March 21, up 2.2 percent from $1,780 per tonne (80.7 cents per pound) March 18. The Nasaac dipped slightly March 22, closing at $1,800 per tonne (81.7 cents per pound).

In step with Nasaac’s upward movement, some secondary alloy prices rose March 21. Prices for A360.1 moved up a penny to $1.11 to $1.12 per pound from $1.10 to $1.11 per pound March 18, and A413.1 tightened to $1.11 to $1.12 per pound from $1.10 to $1.12 per pound previously. A380.1 prices were unchanged at $1.04 to $1.05 per pound.

Meanwhile, prices for all secondary smelters’ aluminum scrap grades were unchanged March 21, as sources said tepid market activity was creating uneasiness.

“Sellers don’t want to sell and consumers aren’t returning phone calls,” one scrap trader said. “It seems to be a rather odd environment right now. Hopefully things start to move a little next week.”

All other secondary grades were unchanged.

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