Most all steel market watchers, buyers, sellers and traders have seen and heard about the US ferrous scrap price free-falls over the past week or two — price falls of between $60 and $70 per long ton, depending on the particular scrap metal product, according to Platts.
So what does this have to do with the aluminum — indeed, all non-ferrous — scrap markets?
Apparently more and more, according to Garey Rittenhouse, PSC Metals’ VP of Non-Ferrous Trading, who presented on aluminum scrap prices at the Harbor Aluminum Outlook conference Wednesday.
“Dependency between ferrous and non-ferrous scrap is very real,” Rittenhouse said, pointing out that when ferrous scrap markets see price increases/decreases, non-ferrous scrap inflows are affected.
While that interdependency is probably the most interesting nugget Rittenhouse offered in terms of proving how interconnected the industrial metals complex is now, he also pinpointed the challenges the non-ferrous scrap markets and non-ferrous scrap prices face.
“Competition from different sectors to purchase scrap is crossing boundaries that we haven’t seen in years prior,” he said. For example, products like old sheet are being used on both the cast alloy side and rolled sheet side.
Scrap quality/grades loom large for the industry. According to Rittenhouse, incoming material quality to shredders and processors has deteriorated. More contamination exists as dealers push specifications, and due to higher sortation costs, there is less sortation at the lower levels of supply chain.
“The knowledge and willingness to spend time and money to do that type of sortation [isn’t there],” Rittenhouse said. However, scrap processors are implementing technology to filter out impurities better, and analyzers are used that are able to tell the amounts of alloys in each piece, he said.
Obsolescence is perhaps one of the biggest issues contributing to the overall challenge of overall scrap availability. Although spread across industries, including consumer durables and manufacturing equipment, obsolescence hits in the automotive sector.
The range for replacing light vehicles used to be about 7-8 years before the 2009-2009 downturn; now it’s up to 8-12 years, according to Rittenhouse. And, he said, the effects on auto obsolescence won’t even fully occur until 2014-15.
Deteriorating consumer confidence across markets, not to mention more purchases that don’t use as much metal, could extend negative effects on the non-ferrous scrap markets.
“Fear is pervasive, and folks are making different decisions on how they spend their personal capital,” whether it’s housing, washing machines or cars, Rittenhouse said.
“Spending on iPads does not help us in the scrap business — there’s not much metal there.”