The final day of the Harbor Aluminum Outlook Summit brings not only more coffee and by-now-familiar views of the Radisson Blu Aqua hotel (the theme? pretty much all blue), but a non-ferrous, particularly aluminum, secondary and wrought scrap outlook.
Folks from Novelis, OneSteel Asia and Aleris International all gave their points of view on the non-ferrous scrap markets, with the prevailing opinions that scrap availability would remain tight, and shifting dynamics in the marketplace would keep aluminum scrap buyers on their toes.
Arguably the biggest of those scrap buyers represented, Novelis, attested that the aluminum rolling company was on target for their “80% recycled content use by 2020” initiative.
Derek Prichett, VP Global Recycling for Novelis, attributes much of the growth to the automotive market (as did most industry speakers; however, MetalMiner feels differently about the auto market lately).
For example, Pritchett pointed to the fact that global automotive-grade aluminum sheet sales are forecast to grow 440% between 2013 and 2020.
China Still Eating Up US Scrap
In terms of exports, speakers placed much focus on China and the rest of Asia as the primary aluminum scrap importers of North American scrap. According to Alejandro Guerra, the senior purchasing manager at Mexico’s Nemtek, 44% of China’s total scrap imports come from North America.
The US’ exports have been increasing since 2000, which puts significant pressure on the domestic scrap market. However, the “China Green Fence Initiative,” according to Ted Lehmann, VP Metal Procurement at Aleris International, will provide near-term relief. From Q1 2012 to Q1 2013, there has been a 10-20 percent decline, mainly due to the fact that the Chinese are essentially enforcing their environmental regulations to reduce the amount of ‘non-desirable items on the way to landfills.’
This gives way to scrap spread increases, as Lehmann sees it. However, more long-term, his belief is that demand for scrap will still be significant as the Chinese are looking to increase their auto production 6 percent year-on-year.
The Role of Latin America in Scrap Exports
Latin American countries are increasingly exporting scrap to China, Malaysia and Korea, and according to Danny Fischer of OneSteel Asia, several factors are making that process easier and more efficient.
Fischer said that increased accessibility between suppliers and end consumers, changes in scrap sorting technology (no more workers cutting through scrap with a meat cleaver), vertical integration (companies that didn’t used to have smelting lines now do), and overcapacity are helping keep the scrap trade between the two regions going strong – although the overcapacity issue gives way to upward pressure on scrap prices and downward pressure on margins.