<article><p class="lead">US spot prices for secondary aluminum alloy A380.1 are expected to soften in the first quarter as some smelters, facing profitable scrap and raw material spreads, are willing to lower offers in the meantime.</p><p>Most market participants surveyed by <i>Argus</i> expect alloy to trade at an average of 85-88¢/lb in the first quarter. </p><p><i>Argus</i> assessed A380.1 at 87.5-88.5¢/lb in the first week of December.</p><p>Benchmark scrap grades old cast and old sheet are trading at eight-year lows of 45-46¢/lb—the lowest since<i> Argus</i> began assessing them—in addition to high-grade turnings, which are also trading at 40-41¢/lb, also close to a series low.</p><p>Most secondary smelter scrap prices hit series lows of in September as an overflow of normally-exported aluminum scrap back into the US overwhelmed consumers, allowing them to rapidly build inventories at low prices and exit the market.</p><p>Additionally, US spot prices for 5-5-5 silicon metal, used in alloying A380.1, have dropped by 12pc from a six-year high $1.46-1.48/lb in the first week of March.</p><p>Still, secondary smelters anticipate a seasonal increase in scrap prices as cold weather causes flows to seasonally dwindle, compressing raw material spreads and capping alloy discounts by the end of the quarter.</p><p>"We are seeing scrap bottom out and with winter coming, prices will be on the rise by-mid January," one scrap buyer said.</p><p>Furnace-ready materials such as refined aluminum twitch, however, are already rising, being much tighter in supply than unprepared material such as old cast and old sheet. Only a handful of US separators can produce true, low-magnesium twitch, and they have been raising prices to account for higher zorba costs.</p><p>US twitch is trading at its highest level since August, having risen 3¢/lb in the last month, compared to <i>Argus</i> prices for 95/2 zorba, which are up by 5.5¢/lb over the same period.</p><p>Another factor likely capping discounts will be a declining stockpile of suitable domestic North American Specialty Aluminum Alloy Contract (Nasaac) alloy in warehouses. Over the past six months, die casters able to use the sometimes less-than-ideal A380.1-type alloy in LME warehouses have been able to buy domestically-produced alloy significantly below the US spot market. But a percentage of those stocks are European and not preferred by most consumers because of oxidation and chemistry issues. US secondaries have not been selling material into Nasaac warehouses for some time because of the contract's sub-spot market pricing.</p><p>When US-origin material runs low, secondaries will be able to push for higher prices from die casters formerly relying on Nasaac A380.1-type metal.</p><p>Most sellers have been unconcerned about GM's recent announcing of layoffs and a further pivot to SUVs from cars, expecting a decline in car-related aluminum castings to be more or less offset by new orders of castings for larger vehicles.</p></article>
