Prioritizing domestic markets

The continued headaches and high prices associated with ocean shipping and over-the-road trucking have led to more localized scrap transactions, sources say.

Describing ocean shipping in early February, one trader for a scrap processing company with operations in the Southeast says, “Availability is not an insurmountable challenge, [but] rates change from week to week and month to month.”

“Logistics is the story of stories,” a trader who works on the West Coast for a brokerage firm based on the East Coast, says. “The scrap is there, but it is stuck and sitting around. The movement of metal is the bottleneck.”

The trader on the West Coast says red metals scrap generation “is the best it has been over the last couple of years.” He adds that he believes supply matches demand, but pricing is artificially inflated because of logistics.

“Logistics is the story of stories. The scrap is there, but it is stuck and sitting around. The movement of metal is the bottleneck.” – a trader based on the West Coast

“The push and pull between dollars is ending up in the transportation camp,” the West Coast trader says.

While overseas buyers can compete on some secondary aluminum grades, the trader in the Southeast says mill-grade scrap is too costly.

“There continues to be a very large spread between consumers of the same commodity,” he says. “Some are more aggressive and some are sitting on the sidelines. There continues to be widely varying prices for the same commodity on a given day.” This situation is most prominent in aluminum scrap but also applies to copper and brass scrap, the trader based in the Southeast adds.

“I think the inconsistency is going to continue to linger,” he says of demand for mill-grade aluminum scrap versus secondary grades. “Aluminum will be a very bullish market, especially on the mill-grade side. Market pricing will stay strong. But there will continue to be a lot of variation in demand between consumers.”

When it comes to red metals scrap, the trader in the Southeast says export pricing will remain inconsistent. Most domestic mills will work to ensure they don’t overextend themselves on scrap purchasing and pricing, he adds.

A number of investments that will consume nonferrous scrap within the U.S. have been announced, including by Atlanta-based Novelis. The company plans to invest $365 million to build a recycling center near its Guthrie, Kentucky, automotive finishing plant.

The site will use production scrap secured through closed loop agreements with the original equipment manufacturers that Novelis supplies and obsolete scrap.

When it comes to obsolete scrap, Beatriz Landa, vice president of metal procurement and recycling for Novelis North America, says the company is developing innovative sorting technologies for the site “that will help us to get all this very odd, very mixed scrap sorted out and cleaned up.” This will allow Novelis to use twitch and zorba, grades traditionally used by secondary aluminum producers.

“I think the more domestic competition [for scrap], and more competition generally, the better,” the Southeast-based trader says. “All things being equal, people want to keep material domestic.”