A preference for local scrap

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 that is based on the East Coast, says. “The scrap is there, but it is stuck and sitting around. The movement of metal is the bottleneck.”

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

“The push and pull between dollars is ending up in the transportation camp,” he adds.

While overseas buyers have been able to compete on some secondary aluminum grades, the trader in the Southeast says prices for mill grade scrap are outside their reach.

“There continues to be a very large spread between consumers of the same commodity,” the trader in the Southeast 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.” He adds that this situation is most prominent in aluminum scrap but that it also applies to copper and brass scrap.

“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. He says most of the domestic mills will work to ensure they don’t overextend themselves on scrap purchasing and pricing.

A number of investments to consume more aluminum and copper scrap within the U.S. have been announced recently, with one of the most recent being Atlanta-based Novelis’ plans to invest $365 million to build a recycling center next to its automotive finishing plant in Guthrie, Kentucky. With annual casting capacity of 240,000 tons of sheet ingot, the company says it expects the facility to reduce its carbon emissions by more than 1 million tons annually while also allowing it to grow its closed-loop-recycling programs with North American automotive customers.

Beatriz Landa, vice president of metal procurement and recycling for Novelis North America, says the company’s investment to produce its own recycled-content automotive aluminum ingots will allow Novelis to become “more sustainable and more independent in the market.”

The site will use a combination of production scrap that it will secure through closed loop agreements with the original equipment manufacturers (OEMs) that Novelis supplies as well as obsolete scrap.

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

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