Three significant players in the aluminum scrap market have declared their support for the new London Metal Exchange (LME) contract for secondary aluminum.
Representatives from General Motors, Detroit; Wabash Alloys LLC, Wabash, Ind.; and OmniSource Corp., Fort Wayne, Ind.; told attendees of a session at the Annual Convention of the Institute of Scrap Recycling Industries Inc. (ISRI) in Las Vegas that their companies would be conducting transactions pegged to the new LME price.
The LME unveiled the North American Special Aluminum Alloy Contract (NASAAC) in early March. LME director of operations Neil Banks says the contract was “tailored with a specification to meet North American [chemistry] requirements.” The contract also features five U.S. delivery points for materials with the modified aluminum 380.1 specifications.
“We’re going to support the NASAAC,” declared Daniel Bealko, a global commodity manager with General Motors. “We will switch our pricing . . . by January of 2003,” Bealko said in regard to GM’s purchases from die casters, scrap dealers and other aluminum traders. “It’s just a more applicable, effective contract.”
Bruce Warshauer, president of Wabash Alloys, indicated that the nation’s largest secondary smelting company would be making a similar switch. “We support the contract and have already purchased [based on the] contract since it started March 4,” he noted.
Warshauer is pleased that the LME can also act as a “buyer of last resort” when Wabash has materials to offer for which it cannot find an attractive destination.
Cindy Brooks, a trader with OmniSource Corp., says the scrap company views the NASAAC as “another tool to help us manage our risk.” Brooks says OmniSource, which also runs the Superior Aluminum Alloys secondary smelter in New Haven, Ind., has viewed trading as too thin on the previous LME contract.
“We believe the NASAAC will provide an effective and useful tool for hedging aluminum scrap,” said Brooks. She is optimistic that the industry will gravitate to the new contract. “When GM says they’re going to use it, it is more than likely most suppliers will go along.”