Awaiting normalcy

Domestic demand for aluminum scrap was largely weak in 2023, with destocking of semifinished goods having a significant effect on sales. “There is still some destocking that needs to take place for the market to be in equilibrium,” Kripke Enterprises Inc. President Chad Kripke says.

“Barring any major downturn in manufacturing, the market should return to what we might perceive as ‘normal’ in the second half of 2024,” he continues. “The timing of which lines up well with new greenfield casting projects coming online, which will be very scrap-intensive. If all the legacy mills and new cast houses are running at full capacity, there could quickly be a deficit of scrap in the U.S.”

In the meantime, however, Kripke says as of late November, order books on billet have seemingly yet to take shape for 2024. “I get the feeling most billet casting operations have only committed to a subsistence amount of scrap they know they will need for regular operations but are hesitant to overcommit and definitely not able to be aggressive on spreads,” he says.

He adds that as of late November, some consumers of aluminum scrap weren’t taking delivery of new orders until January 2024, with several facilities taking longer-than-usual breaks for planned maintenance projects at year-end.

Writing for the Bureau of International Recycling (BIR) December 2023 “World Mirror on Non-Ferrous Metals,” Rick Dobkin of Shapiro Metals, headquartered in St. Louis, says, “The metals business seems to have settled into holiday and end-of-year inventory slowdowns. Many rolling mills are out of the markets until 2024 as they reduce inventories for the end of the year. Billet producers, although slow, are active in the spot scrap marketplace at present; their demand for scrap seems to be a reaction to slower extrusion production, which leads to less revert metal coming back to the cast house. Die cast business is stable and returning to normal levels following the end of the UAW strikes.”

As of late November, can sheet producers also were starting to reenter the market, with Kripke predicting they would have stronger appetites in the first quarter of 2024. 

“Secondary smelters appeared to be the beneficiaries of the wide scrap spreads,” Kripke adds, “having little issue finding what metal they needed, which may have been of higher quality due to pricing parity on some grades with sheet mills.”

He says primary aluminum producers have entered the domestic market, forced by the growing desire for recycled content and decarbonization. “This is evident in Rio Tinto’s recent purchase of a stake in Matalco. Primary producers now have an appetite for 6063 extrusion, EC [electrical conductor] wire and other purity grades of aluminum scrap,” Kripke adds.

Companies that melt aluminum scrap also are seeing the need to consume more lower-grade materials, which has prompted numerous investments, including a joint venture between Michigan recycling firm Padnos and aluminum producer Hydro focused on industrializing Hydro’s proprietary sorting technology, HySort.

In that same vein, Novelis has partnered with Sortera Alloys to use that company’s advanced sorting technologies, including data analytics and advanced sensors, to recycle and reuse more automotive postproduction and postconsumer scrap.

Recycling company Schupan also has invested $40 million into two sorting facilities for aluminum scrap in Michigan and Kentucky, with the intention of serving its consuming customers nearby.

In the red metals sector, “Domestic copper consumers are trying to widen spreads, as demand is a little off, but are getting pushback amid brisk export interest,” Dobkins says. “Brass ingot makers are somewhat busier, and this is reflected in pricing.”