Export demand aids nonferrous scrap movement

Supply and demand for aluminum scrap are suffering from a significant imbalance as of mid-March, says Chad Kripke, president of Kripke Enterprises Inc. (KEI), Toledo, Ohio.

“At the end of last year [and] beginning of this year, I was thinking it might take until the second quarter to improve,” he says. “But it’s a foregone conclusion at this point that it’s not going to happen.”

Instead, Kripke is looking to the third quarter before the situation changes. “Hopefully, in the early second half of this year, things will begin to reach equilibrium,” he says.

The automotive and construction sectors continue to generate scrap, but anemic domestic demand is “forcing a lot of metal to go overseas,” Kripke says, adding that demand is coming from Asia, Europe and India.

Despite the role the export market is playing in March to help absorb excess domestic supply of aluminum scrap, U.S. exports of recycled aluminum and copper in tonnage terms declined 0.8 percent and 4.1 percent, respectively, year over year in January. Joe Pickard, chief economist and director of commodities at the Institute of Scrap Recycling Industries (ISRI), Washington, shared those figures in the Weekly Market Report e-newsletter March 17.

“At just over 160,000 metric tons, the year-on-year decline in U.S. recycled aluminum exports in January 2023 reflected downturns in demand from India (-28 percent) and Mexico (-14 percent) that overshadowed heavier loadings for Malaysia, Hong Kong and Thailand,” he writes, citing data from the U.S. Census Bureau, U.S. International Trade Commission and ISRI.

Recycled copper and copper alloys exported from the U.S. declined by 4 percent to 72,050 metric tons year over year in January, Pickard notes, as a result of weaker demand from China (-4 percent), Malaysia (-34 percent) and South Korea (-26 percent). The softer demand from those countries reduced the effect of the gains seen from India, Thailand, Canada and other markets, he says.

A wire processor based in the Midwest says the market is quieter as of mid-March, saying, “The phone hasn't been rung quite as much in the last couple of weeks.”

He also mentions domestic demand has declined, particularly for aluminum chops, adding that consumers are honoring their commitments, but any additional material is not easy to place.

While the wire processor says demand for copper chops has been softer since the start of the year, “We can sell if we need to at a pretty competitive price.”

A nonferrous metals trader based in the Southeast who specializes in copper scrap says that while he was at the ISRI Mid-America Chapter Consumers Night Banquet in St. Louis in mid-February, everyone said they were slow or steady, but no one said they were “busy.” 

“Typically, this time of year, the weather is a factor with slow business, but it’s been somewhat a mild winter, particularly in the Northeast,” he says, noting the exception of a mid-March storm in New England. “Markets are always a factor and have been very dynamic, particularly in the last several months. Copper, which has been hovering around $4.15-20-ish for some time, finally dropped below the key $4 level. This is no doubt due to the knee-jerk reaction to the banking crisis [involving the collapse of some U.S. regional banks led by Silicon Valley Bank in mid-March] as, fundamentally, there is no reason for copper to be under $4.” Rather, he says, “All factors point to copper being much, much higher,” citing warehouse stocks at lifetime lows as one example.

He says scheduling deliveries into domestic red metals consumers “isn’t too bad.” However, he adds, “There have been some major delays on export off the [U.S. East Coast], which is pushing many suppliers to keep metal domestic” though the associated freight costs are higher.

The trader says export demand for lead, aluminum and copper was strong through mid-March. “Seems there are many new buyers in Malaysia and Thailand entering the marketplace recently. After Chinese New Year, the consumers there seem to be aggressive as well.”