Scrap aluminum sales retreat as LME prices slump

TOKYO (Scrap Monster): The spot trade of scrap aluminum witnessed sharp slowdown in Japan as LME prices for the metal continued to slide further. The spot trades of primary and secondary aluminum, especially from Russia and Europe, turned weak. The activity in Japanese domestic scrap market too remained subdued. Incidentally, 3-month aluminum contract on the LME plunged to $1,558 per mt-the lowest in several years.

According to scrap dealers, they find themselves in a difficult position as the LME prices often fall below their offer prices. They are already being forced to lower their offer prices. The constant decline in LME prices make them incline to further lowering of offer prices the next day, they said. On account of huge fluctuation in prices, brokers have suspended spot scrap sales and are supplying only term buyers.

Many scrap sellers are unwilling to sell at lower prices. LME Aluminum prices have dropped almost 3% since the first week of August. However, scrap traders are reluctant to lower the spot scrap sell prices by 3%. This has made scrap trade almost stagnant. According to traders, the downside for aluminum looks limited now. The scrap aluminum market is likely to tighten further by end-August, following reopening of mills after regular week long temporary maintenance shutdown.

Meantime, 6063-A-grade extrusion scrap trades were concluded at Yen 190/kg ($1.52) delivered to Kanto region during early-August. Buyers were seen quoting at a much lower rate of Yen 180-185/kg delivered. However, sellers were seen unwilling to settle for prices less than 190/kg. Also, some scrap items like tellic and engine scrap were reportedly running out of stock. The supplies of used beverage canstock continued to remain robust. Market participants anticipate further fall in prices of this category.