Pricing remains strong for copper, aluminum scrap

Scrap processors point to strong pricing for copper and aluminum scrap, though the volatility in copper pricing is making at least one scrap processor long for consistency.

“I would like to see a little bit of stability,” says Todd Safran of copper and brass processor Safran Metals in Chicago. “Everyone loves to see a higher market, but it’s a matter of knowing that the price today will be similar to the price tomorrow.”

“When we see the price pull back, consumers jump in to buy. A lot of consumers are taking what they need and nothing more.”
-- Todd Safran of Safran Metals, Chicago

The Comex spot copper contract reached $3.99 per pound March 5, a decrease of 10.3 cents per pound from the previous week, according to Davis Index. During the last week of February, the Comex spot copper contract had reached $4.30 per pound.

This volatility can mean that scrap consumers are interested one day and not the next day, Safran says. “When we see the price pull back, consumers jump in to buy.” However, he adds, “A lot of consumers are taking what they need and nothing more.”

While copper scrap buying may be somewhat muted currently, the growth of green energy could lead to increased demand for the red metal in the future, which likely will increase demand for copper scrap.

During the Fastmarkets Copper Seminar March 11-12, Boris Mikanikrezai, a researcher with Fastmarkets, said copper demand will strengthen as the world transitions to green energy. He noted that offshore wind energy requires 22 pounds of copper per kilowatt, which is 4.5-times more than nuclear energy and five-times more than coal energy.

More generally, global industrial production is forecast to increase by 6 percent this year, Mikanikrezai said, with the automotive sector leading that growth, prompting increased demand for refined copper. He predicted a 16 percent increase in motor vehicle production this year.

Longer term, he said, the electric vehicle (EV) “revolution” would lead to increased refined copper demand, noting that a battery electric vehicle (BEV) consumes roughly 183 pounds of refined copper compared with the 51 pounds used in internal combustion engine vehicles (ICEVs). A plug-in hybrid electric vehicle uses about 132 pounds of refined copper, which is roughly three-times more than an ICEV, and an electric bus contains 814 pounds of refined copper, largely in its battery.

Mikanikrezai said global BEV sales are expected to grow by 26 percent per year on average by 2030, with Europe likely to experience the strongest growth of 28 percent on average, followed by China at 27 percent and the U.S. at 23 percent.

While these figures could point to growing demand for copper scrap in the future, demand for aluminum scrap presently is strong.

“Spreads are very tight and there seems to be a shortness of scrap,” says Matt Kripke of aluminum scrap brokerage firm Kripke Enterprises Inc., headquartered in Toledo, Ohio. He adds that demand for coil, billets, slab and cans has exceeded the pace of scrap generation, causing spreads to tighten. “We’re 30 to 60 days away from getting back to equilibrium,” he says as of March 11. Once scrap generation catches up with demand, he says he expects the spread to begin to widen.

Some of that scrap is likely to come from the winter storms that hit much of the country in February, particularly Texas, where ice and snow are rare, Kripke says, as damaged gutters and downspouts are replaced. “A lot of scrap will hit the market.”

As of early March, however, a contact with a scrap processor that has operations in the Midwest and Southeast says, “It doesn’t seem like there is enough scrap. All the rolling mills are busy and in need of scrap. Secondary smelters are the same.”

He says demand is strong for most aluminum grades, with the exception of aerospace scrap, and he expects the tightness in the scrap supply to linger through the second quarter.

“It’s hard to tell if demand is that strong or if the supply is that weak,” Kripke says. “You can sell anything you can get your hands on. You can name the price if you have material.”

While he says export demand for aluminum scrap “had kind of a moment five or six months ago when the Midwest premium dipped,” as that premium strengthened, it has been hard for export buyers to pull aluminum scrap out of the U.S. because they cannot be competitive on price.

As challenging as the tightness is in the aluminum scrap sector, Kripke says the bigger challenge has been transportation, pointing to increasing costs and reduced availability.

The processor with operations in the Midwest and Southeast describes trucking as being “expensive and in short supply and frustrating,” adding that “reliability is terrible.”