Despite transportation issues, nonferrous scrap keeps flowing

Nonferrous scrap metals are flowing well as of mid-October, despite the transportation-related issues that continue to affect supply chains in the U.S. and globally.

“In general, demand is still really good,” says a marketing executive with a scrap processing company that handles postindustrial material at multiple locations in the Midwest and Southeast.

He says spreads have remained consistent for aluminum extrusions and other rolling mill grades in recent months, though pricing has increased. However, spreads have widened for painted siding and other secondary grades, the marketing executive says, and demand has strengthened as well.  

“On the secondary side, things were kind of quiet,” he says. “And now it appears like pricing is a little bit more attractive.”

The shortage of silicon and magnesium is increasing demand and pricing for aluminum scrap with this content, he says.

A vice president of marketing and trading with another multilocation scrap processor based in the Midwest says the rising price of the common alloy A380 has brought up scrap prices on the secondary side, despite ongoing production issues in the automotive sector related to the semiconductor shortage. “We can sell our secondary aluminum, and right now prices are pretty decent.”

Joel Fogel, executive vice president of nonferrous for Cohen, Middletown, Ohio, also mentions the widening of spreads for common alloy material, such as mixed low-copper clips and siding. He notes increased export interest in this material, too. “That’s a different dynamic,” Fogel says. “I don’t know that we’ve seen global competitiveness as it relates to the domestic number on the aluminum side for several years.”

The marketing executive describes export demand for aluminum scrap grades such as pucks and turnings as “pretty healthy” with good pricing.

“We’ve been pretty attentive to our export business recently,” he says, noting that transportation bottlenecks require close monitoring. “We’ve been keeping close contact with transportation and operations. Last week, everything that was scheduled to ship shipped on time. We thought we turned a corner,” he says in mid-October. “Today, not a single one of three export loads shipped because we could not get containers.”

While Fogel says aluminum scrap is moving well, some primary mills are pushing out deliveries. “You can’t really sell and ship in the same month.”

The marketing executive says he sees demand remaining strong through year-end, adding that he sees “no signs of things slowing down.”

Fogel says talk of infrastructure investments in the U.S. and globally are pushing commodity prices higher. This is compounded by “all of the supply chain issues and labor issues and the optimism in the terminal and financial markets,” he adds. “I think it’s a perfect storm; there’s not one reason why everything’s up. There are multiple reasons. I personally feel like we might not continue to ascend the way we are. But I really see and feel that the markets will remain stable for the next several quarters.”

Demand and pricing remain strong for red metal scrap.

“The market ran up quite a bit since the middle of last week, and spreads haven’t widened, and that tells you something,” the vice president with the Midwest-based scrap company says. “It’s an indicator of strong demand.”

“As it relates to copper, spreads haven’t moved very much as the market’s gone up,” Fogel says, adding that he thinks things will become more competitive for copper scrap with the capacity additions that have been alluded to in North America.  

He says, “I think there will be more demand for secondary-type copper in the United States that hasn't existed.” He adds that this increased demand should work to narrow or maintain spreads.

According to Davis Index, spreads did begin to widen Oct. 19, when Comex copper closed at $4.71 per pound, an increase of 39 cents per pound from Oct. 12. The news and pricing service adds that many market participants expect the Comex copper price to reach $5 per pound before the end of October.

While Todd Safran of Safran Metals in Chicago says red metal scrap is flowing well, the high prices have some consumers sitting on the sidelines. He says some consumers need prompt deliveries, while others are one to two months out.

Issues with trucking could be contributing to the need for prompt deliveries at some copper consumers, he speculates. Cost-effective trucking is difficult to come by, Safran says, though it is generally available. “For the right price, anything can move. But the wrong price can kill a deal pretty quickly.”

The vice president with the Midwest-based scrap firm says domestic and export demand for red metal scrap remains strong. Because of the supply chain issues, he says, “No consumer wants to lose much scrap.”