The aluminum scrap market is flooded with an oversupply of automotive stamping scrap. Chad Kripke, vice president, risk management, for the aluminum trading company Kripke Enterprises Inc., Toledo, Ohio, says the impact this situation is having on the market can’t be stressed enough. “It’s like drinking through a fire hose.”
Kripke says the aluminum content in vehicles is increasing with every model year, but there is no place to consume these high volumes once they enter the scrap stream.
“A lot of this mixed alloy 5000, 6000 auto sheet has found its way into the MLC (mixed low-copper clips) stream,” he says. “If you’re a sheet mill, for example, and trying to make 3105 or 3004 alloys with lower silicon and magnesium and high manganese, and you put this stamping scrap in there that has 1 to 1.5 percent silicon or 5 percent magnesium in it, you can only blend off so much of that,” Kripke says. “You can’t make vanilla cake with chocolate cake batter.”
He describes the first quarter of 2018 as “rough,” adding that a number of furnaces were down and consumers were pushing deliveries off.
Additionally, scrap processors lost two to three days of production because it was too cold to work in parts of the Midwest and Northeast.
Kripke says once the supply hangover of 2018 resolves itself and consumers restart, as long as the economy remains strong, “the market will normalize and you will start to see a little more competition for some of these things.”
He does not expect to see any relief in the market until the middle of the second quarter of the year at the very soonest. “But back in November of last year, I said it was February, so … ,” Kripke adds.
“It’s very tough to move aluminum, especially here on the West Coast, unless you are going export, and the prices aren’t wonderful.” – a scrap wholesale buyer and processor based on the West Coast
A wholesale buyer and processor based on the West Coast says consumers in his area that would normally buy segregated alloys are not doing so as of mid-March.
“It’s very tough to move aluminum, especially here on the West Coast, unless you are going export, and the prices aren’t wonderful,” he says.
Traditional export markets for obsolete grades of aluminum scrap in Korea have eroded, the West Coast source adds, while buyers in Japan, Malaysia and Thailand have been making spot purchases.
The processor says he doesn’t see aluminum scrap demand picking up in the second quarter and instead he sees more of the same. “There is softness in the market. Things have gotten slow.”
When it comes to red metal scrap, however, the market is better. He says margins are reasonable and material is not flowing in as rapidly as it was a month or two ago. However, he is concerned about what could happen in July if China’s government requires import licenses for the eight categories of scrap metal the country added to its restricted list.
The Institute of Scrap Recycling Industries (ISRI), Washington, has stated that it expects the “other” aluminum and copper scrap categories noted in China’s announcement to include Category 6 “smelter ready” material that does not require further processing. Category 7 scrap, which includes electric motors and other items that require additional processing to liberate these metals, will be banned starting in 2020.