Conference Participants See Scrap Aluminum Prices Rising

Higher aluminum scrap prices are expected next year, according to 67% of participants in the Harbor Aluminum outlook conference in Chicago survey Wednesday. Of those survey participants, 48% say scrap prices are strategic to their bottom line.

Record-low metallic recovery combined with more use of aluminum in cars and a rebound in the auto sector is causing scrap prices to rise, says Jesus Villegas, senior aluminum analyst, Harbor Intelligence. The auto sector has rebounded 57% from two years ago, while aluminum used in cars has risen 138% from 1986 to 2010. Further, more scrap is being shipped to China. This leads to a structural decline in scrap supplies. He spoke at the Harbor Aluminum outlook conference in Chicago.

The severe tightness in the scrap market could defy the seasonally weak time that normally occurs in the next few months, says Jesus Villegas, senior aluminum analyst, Harbor Intelligence. Scrap prices will be affected by short-term patterns, such as Japan’s earthquake and tsunami had an impact on auto production, and thus scrap aluminum prices. On a regional basis, North America has been the least affected by the Japan situation. Once the Japan situation no longer affects the market, it could push prices upward in the Northern Hemisphere summer, which is a counter-seasonal trend. He spoke at the Harbor Aluminum outlook conference in Chicago.

China’s auto manufacturing industry will be a key sector to drive the growth of the secondary aluminum market. Only 100 kilograms of China’s passenger cars contain aluminum, which is equivalent to the level seen in North America in 1996, says Xiong Hui, senior analyst, Beijing Antaike Information Development Co. Antaike estimates China’s recovery of domestic old scrap in the next decade will grow at an annualized growth rate of 14%, up five percentage points from the previous decade. How much China can source scrap internationally is questionable because of the high demand for aluminum scrap globally as economies rebound. Further, China’s neighbors such as India and Thailand are also competing for scrap. She spoke at the Harbor Aluminum outlook conference in Chicago.

After dealing with a shortage of scrap aluminum in 2010 and higher prices as a result, demand for secondary aluminum has slowed in 2011 in China, says Xiong Hui, senior analyst, Beijing Antaike Information Development Co. That slows down production growth of scrap and substitution of primary aluminum for secondary is gradually fading. That has allowed the gap between the two types of metal to widen, and secondary aluminum is beginning to become competitive again. She spoke at the Harbor Aluminum outlook conference in Chicago.

China’s secondary aluminum production will reach 5.17 million metric tons in 2011, up 6.7% year over year, which Xiong Hui, senior analyst, Beijing Antaike Information Development Co., says is a moderated growth rate. They arrived at this estimate by considering that subdued demand growth will keep a cap on production. The scrap market is not as tight as it was in 2010, even as imports of scrap fell during the first four months of 2011. The deficit seen in 2010 should turn to be more in balance in 2011. She spoke at the Harbor Aluminum outlook conference in Chicago.