A flood of aluminum scrap

Aluminum scrap continues to feel the effects of a supply overhang in the domestic market, with no immediate end visible, sources say.

“It’s not the best I’ve ever seen it,” says a scrap processor based in the Southeast. “There is a glut of metal in the market, so as good businessmen do, they are widening the spreads and making more money where they can,” he says of aluminum scrap consumers. “If you are on one end, you’re winning. We’re not winning.”

He adds that at some point something will happen to reverse the situation, at which point he’ll be smiling. But, as of mid-January, the scrap processor says, “I’m not smiling much today.”

Roughly 60 percent of the aluminum scrap the company handles is generated by industrial accounts, and there is no turning off the faucet. However, when it comes to obsolete material, he says his company has “reduced [our] off-street buying price.” This has helped to lessen the scrap volume entering his yard.

“We have been in a good position where we have been able to ship what we’ve bought.” – an aluminum scrap processor based in the Southeast

“We have been in a good position where we have been able to ship what we’ve bought,” the processor says. “We’re not holding inventory.”

A scrap processor in the Midwest is taking a different tactic when it comes to aluminum scrap. “We are holding high-priced material as the market drops,” he says.

The market for copper scrap is much better comparatively. “I sell the copper before I get it,” the Midwest-based processor says.

While the processor based in the Southeast says his aluminum scrap is sold domestically, some of the company’s copper scrap—mainly No. 2 copper—is shipped internationally, with Malaysia and Japan having been popular destinations in 2018. “I bet it’s been six months since we direct shipped anything to China.”

The processor in the Southeast says he tries to remain optimistic, but adds, “I don’t see anything in the first quarter of 2019 that tells me we are going to have an improvement” in the aluminum scrap sector. He says he’s hopeful the second quarter or second half of the year will bring relief. “I’ve always heard hope is not a business strategy, so I need to keep that out of it.”

While the aluminum scrap market might still be searching for the bottom, tightness in the transportation sector has eased somewhat, he says. “We had less trouble in the last quarter than we did in the middle of the year,” the processor says, adding that trucking started to become more available in his region in the third quarter of 2018.

He says his company is no longer double-booking trucks as it had been doing in the first half of 2018 because of concerns that the trucks would not show up as planned.

Despite the easing in truck availability, pricing remains high. “Our freight costs went up 32 percent last year,” the processor based in the Southeast says.

The Midwest-based processor saw a similar increase in freight rates in 2018 but adds that his company had no problems getting material out of its yard and to its customers.