Over the past few weeks the UK’s aluminium scrap market has tightened significantly, seeing prices increasing as much as 15% as buyers seek out raw material. Such price increases have been attributed to cold weather and Christmas shutdowns, which have reduced household scrap collection and the production of industrial scrap respectively.
Though these factors have contributed to the market tightening, the sharp increase in prices has been exacerbated by a stronger euro adding continental competition to the existing competition from Asian markets. Additionally, the fact that these factors have converged into a ‘perfect storm’ means it has come as a surprise to the UK scrap market.
In December, many secondary aluminium ingot manufacturers sold forward with the expectation that prices would plateau or even fall as we moved into 2013. The steep increase in prices has forced these producers to desperately seek scrap aluminium just to cover order commitments, and this is before they take on new business.
Until the Chinese market returns from the new year celebrations, many suppliers holding scrap aluminium are reluctant to release it, hoping that prices increase further. However Chinese companies are experiencing an increase in costs too – especially in terms of labour – and may not be in a position to buy large volumes of scrap metal at the higher prices.
Should this be true scrap dealers may be forced to lower their prices to compete, which will offer welcome relief to secondary ingot manufacturers who have been struggling with workable margins since last year.