Oversupply persists

Departments - Commodities Nonferrous

Domestic aluminum and copper scrap markets still feel the effects of oversupply.

September 3, 2019

The oversupply of aluminum and copper scrap in the North American market continues to persist as the third quarter of the year draws toward a close, though sources say the situation appears to be more acute for aluminum. (For more information on the aluminum scrap market, see “Out of balance,” starting on page 44.)

In the Midwest, one source says the overall volume of obsolete aluminum scrap his company handles has declined in 2019, citing low pricing as a major factor. “Dealers and even large peddlers are not willing to sell” at the low prices that have characterized the market, he says.

While his company traditionally did not export aluminum scrap, that changed this year. “We’ve been able to keep material moving and keep prices as high as possible because of our global network,” the Midwest-based scrap processor and dealer says. “We can find a sale that is a little better than here going export.”

“Automotive scrap throws everything off. It offsets the natural flow of other things.” – a scrap processor and trader based on the West Coast

The source in the Midwest says demand for aluminum scrap from domestic primary mills has been “relatively stable” this year; however, demand from domestic secondary aluminum producers “has really fallen recently.”

A processor and trader based on the West Coast says the market has not been able to keep up with the oversupply of automotive sheet scrap, which is displacing demand for other grades. “Automotive scrap throws everything off. It offsets the natural flow of other things,” he says, mentioning extrusions and painted siding as examples of grades that have been affected.

On the West Coast, he says small dealers and peddlers have less of a tendency to hold on to scrap in hopes of better pricing in the future than those in the Midwest.

“In North America, most of the metal flowing around is on contracted sales. In Europe and Asia, it is still quite transactional,” he says, adding that his company has found a number of new homes internationally for the aluminum scrap it handles.

In the red metals sector, the West Coast source says a fair amount of consolidation has occurred, referring to Ulm, Germany-based Wieland Group’s purchase of Global Brass and Copper Holdings Inc., Schaumburg, Illinois, and Hamburg, Germany-based Aurubis’ plans to purchase Metallo Group, with locations in Spain and Belgium. He adds that this consolidation and tariffs on U.S. scrap into China are “forcing people to look at new trade lanes.”

U.S. copper scrap shipments to China, which used to be a major consumer of No. 2 copper and other forms of copper scrap, have declined by more than 75 percent through May in response to scrap import restrictions and the U.S.-China trade war. Overall, U.S. exports of copper scrap have declined by 2 percent through May, despite 390 percent growth in exports to Singapore, 370 percent growth in exports to Sweden and 263 percent growth in exports to Malaysia, as well as to other nations, according to the Institute of Scrap Recycling Industries (ISRI), Washington, which cites U.S. Census Bureau data in its “ISRI Nonferrous Beat” e-newsletter dated Aug. 12.

Regarding No. 2 copper chops, which are growing in availability in North America, the West Coast source says they can be inconsistent in quality, making it “hard for mills to decide which they want” and making assaying a necessity.