Recycled aluminum demand bouncing back in 2000
NEW YORK - Demand for scrap aluminum has been trended upward since the mid-1990s and despite a slowdown in recent years, industry players said it is rebounding again in 2000 and every piece of recycled aluminum they can get their hands on is used.
"Theres always a desire for more metal recovery, because that saves energy and its cost efficient," said Robin King, Vice President, Communications for the Aluminum Association.
Last week, the Aluminum Association applauded Ford Motor Co. for announcing efforts to improve fuel economy in its cars. The association anticipates greater use of the light-weight metal in Fords vehicles.
The auto industry is perhaps the biggest users of aluminum scrap, and has been incorporating an increasing percentage of the light-weight metal in the design of their vehicles.
"Theres a concerted effort to develop technology for recycling in a number of ways within the automotive industry," said the Aluminum Associations King.
Craig Gleeson, purchasing specialist for Ford, told Reuters that the company recycles everything it generates at Ford manufacturing plants back into aluminum ingot. Ford has additional units that that it must buy on a monthly basis.
As cars containing larger amounts of aluminum wear out, theyll head for the junk yard. Over 90 percent of a retired vehicle gets recycled, and will add to secondary aluminum supplies down the road.
It costs about 95 percent less to remelt used aluminum than to start from scratch to process primary aluminum.
Another big user of recycled aluminum is the beverage can industry, where better than 60 percent of used cans have been reclamed for the last 11 years.
A spokesman at a large secondary aluminum dealer said he thinks scrap supplies are relatively fixed, arguing that an impediment to even higher use of recycled aluminum cans is the expense of recapturing those that end up in landfills.
Moreover, many scrap gatherers who run small operations cannot afford to hoard the metal.
But, Bob Garino, director of commodities at the Institute of Scrap Recycling Industries (ISRI), said the scrap is price elastic. "I guarantee that if the price of aluminum goes up, youll see scrap start to come out of the woodworks."
In first half of this year, the London Metal Exchange reported that aluminum warehouse stocks were down 34 percent over year-ago levels.
Inventories have since fallen further to stand at 464,750 tonnes and experts think they will continue trending lower this year. Moreover, analysts expect global aluminum consumption will rise about four percent in 2000.
If their outlook is correct, pressure should mount to find those stashes of scrap.
In 1999, scrap aluminum consumption stayed about even, but dipped to a five-year low in terms of market share. Thats because overall aluminum consumption began to pull out of a slump, with both worldwide and U.S. primary aluminum consumption up about five percent over 1998.
As a percentage of total U.S. consumption, scrap slipped to 41 percent last year, from 43 percent in 1998, and 46 percent in 1997. Total aluminum demand was 11.4 million short tons in 1999 according to ISRI.
Aluminum prices have been trending up generally since the LME three-month contract hit a five-year low around $1159 per metric tonne in March 1999. Yesterday, LME aluminum was quoted at $1568.
Some forecasters predict aluminum will trade back up towards $1680 a tonne, though the 2000 high of the $1754 seems out of reach near term.
Scrap prices track the LME contract as their benchmark. But scrap has its own supply/demand concerns that can determine the differential to the LME price as well.
For example, for the construction industry, a major consumer of scrap, housing demand is very sensitive to the threat of higher U.S. interest rates.
"Overall aluminum production may not be rising at a great rate," said King. "Recovery through recycling does save energy and thus costs to our industry. So theres always a desire to increase that segment, regardless of total production demand."
Story by Carole Vaporean
REUTERS NEWS SERVICE
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