Nonferrous Department

Soft Pricing, Tight Supply

The irrationality in the nonferrous scrap markets continues, as dealers complain of low pricing at the same time consumers worry about tight supply.

Prices for copper and aluminum scrap (as well as for the primary metals) have shown no recent signs of gaining the ground that has been lost over the past year and a half. The prices have been so low for so long, that most scrap processors and consumers are skeptical that much actual hoarding is taking place.

Nonetheless, scrap shippers and consumers continually use the word “tight” to describe the overall availability of material. “Usually this tightness is just for the winter, but I see it lasting at least into April or May,” says one aluminum scrap consumer based in Michigan.

“All my dealers are telling me that it’s slow in the retail business,” notes the consumer. The result, he notes, is “there are too many people out there competing for the same scrap.”

So while low scrap prices would seem to be a boon for consumers, the current tight market does present its problems. The main one, of course, is competing with primary aluminum producers who are sourcing material on an equally low price footing.

Among the other complaints: “We do have to pay a little more than published pricing would indicate—which narrows our margins—just to buy enough to fill our orders,” says the consumer. “We have to buy grades we wouldn’t normally buy, including the better or higher grades we normally wouldn’t pay for. We also buy lower grades for our rotary furnace and melt them there before transferring them into our furnace.”

The overall situation has been difficult for secondary aluminum smelters and alloy makers. “The last three months, the margins are tough,” the consumer notes. “I don’t see it getting better for another month or two.”

A ferrous processor believes that the slowdown in auto shredding activity is the primary reason aluminum scrap is in short supply. “The fact that autos aren’t coming into scrap yards has directly produced a scarcity of secondary aluminum scrap,” he says.

“Secondary aluminum made from scrap is worth as much or more as primary aluminum right now,” he continues. “The reason is entirely attributable to the weakening of scrap supply on the ferrous side.”

If that’s the case, the early March decline in ferrous scrap pricing is one more reason to worry that the spring of 1999 will not bring better fortunes to those in the nonferrous scrap industry.

IMCO SIGNS BILLION DOLLAR GM DEAL

IMCO Recycling Inc., Irving, Texas, has signed a deal with General Motors, Detroit, to supply the auto maker with secondary aluminum alloys over a 13-year period.

As part of the deal, IMCO will build a processing plant in Zilwaukee, Mich. that will directly supply a GM casting operation in Saginaw, Mich. The IMCO plant, which is expected to cost $22 million to build, will have a capacity of 100,000 tons per year and is projected to be operational in the first quarter of the year 2000.

The deal comes several months after GM reached a major ten-year primary aluminum supply agreement with Alcan Aluminum, Montreal. Metals industry analysts believe long-term agreements such as these are becoming more attractive to aluminum companies seeking to ensure high-volume shipments during a time of low pricing.

The deals combined would seem to confirm that General Motors will continue to find an increasing number of uses for aluminum in its vehicles. The company will reportedly be the first major automaker to switch almost completely away from cast iron engine parts in favor of cast aluminum, perhaps completing the change-over in the middle of the next decade.

The IMCO agreement should benefit the secondary aluminum alloys industry overall, IMCO chairman Don Ingram has stated. He notes that 65% of the aluminum used in vehicle manufacturing is made from recycled metal, and that the percentage could rise as more aluminum scrap becomes available with the obsolescence of later model cars.

METECH UPGRADES CALIFORNIA FACILITY

Metech International Inc. is investing more than $600,000 to upgrade its Gilroy, Calif. precious metal scrap recovery facility. The Gilroy plant processes computers, electronic components and other scrap, and also recycles and refines precious metals.