As summer temperatures rise, aluminum demand swoons

As the mercury rises in many parts of the U.S., aluminum scrap demand, particularly from rolling mills, has remained subdued as of June. However, demand for copper scrap remains strong.

According to Davis Index, a downward trend in rolling mills’ scrap purchases began in early June, with buyers gradually widening spreads. “As a result, outright prices for most grades have been falling despite a steady Midwest Transaction price,” the service reports as of June 20. Because buyers are being more selective, Davis Index says mixed low copper clips and EC (electrical conductivity) wire have tightened as of the second full week of June.

“Generation has been pretty consistent the last few months,” a trader for a scrap processing company with locations in the Midwest and Southeast says of nonferrous scrap generally.

Scott Greenberg, a senior trader based in Florida for C&Y Global, which is headquartered in Houston, says copper scrap supplies are tight. While this is typical for summertime, falling steel prices also likely have affected obsolete nonferrous scrap flows, he adds.

“There is no overhang of copper scrap,” the Midwest-based trader says, adding that demand for the material is good.

While aluminum scrap demand is weak, he says supply is not as robust as some consumers think. “If there’s only a few percentage points increase in demand, the scrap wouldn’t necessarily be there,” he adds. “There is not a dramatic oversupply.”

He adds that he realizes this likely is a minority opinion.

“Generation has been pretty consistent the last few months. We are off the lows we saw toward the end of the year and beginning of 2023.” – a trader for a scrap processing company with locations in the Midwest and Southeast

Greenberg notes that changes in the marketplace are affecting red metals demand. “Not as much scrap usually means higher prices, but the truth with Schumann’s terrible tragedy resulting in their shutdown means there’s one less domestic consumer in the market,” he says, referring to the explosion that occurred at brass ingot maker I. Schumann & Co. near Cleveland this past winter.

“However, the Ames secondary smelter is up and running, so that helps, and with Aurubis and others also preparing to enter the U.S. marketplace as consumers, I expect demand for copper will get stronger,” Greenberg adds.

The expected boom in demand from China following the lifting of its COVID-19-related restrictions earlier this year was not realized. “But, for clean material that meets their strict quality specifications, there is decent demand there,” he says.

The trader in the Midwest also says export demand for red metals has been good, though smelters based in Europe are not paying well.

He says spreads haven’t widened for No. 2 copper scrap for at least a few months, indicating good demand.

Greenberg adds that as more secondary copper smelting operations open in the U.S., the No. 2 market will grow increasingly competitive.