North American heavy media plants look to Asia

More North American heavy media plants are turning to the export market to sell their twitch, as semiconductor shortages have pushed regional automotive demand down for aluminum.

US twitch traded between 77-79¢/lb delivered over the past month, as Asian import numbers for the same material were close by on an fas basis, or even higher, depending on the quality.

Twitch is a refined, aluminum scrap package recovered from nonferrous automotive shredder residue zorba, using floatation plants. The product can be charged directly into a furnace, unlike zorba, which contains mixed metals and other impurities undesirable for making A380.1 or ADC12 aluminum alloys.

Over the past month, Argus has confirmed sales of floated twitch to Taiwan and South Korea in the low-to-mid 80¢/lb cif range and sales of floated and polished twitch to China as high as 92¢/lb cif. Before May, US exports of twitch were infrequent, but now they have become more regular.

One heavy media plant operator called the recent jump in Asian demand for North American twitch "good timing," happening just as US and Mexican demand began to wane again.

"Guys aren't getting off their [twitch] volume in one shot now. It may take them three or four orders now, as opposed to one in the past. It's taking more work to move it," one US secondary smelter said.

But while the export market has allowed heavy media plants to move volume that might have otherwise gone unsold, container freight remains a challenge for some more than others, just as with zorba.

"I'm not saying it's like the olden days, like 6 months ago, but I can get a booking 2-3 weeks from now," a twitch producer in the southern US shipping to Asia told Argus.

"They're getting canceled and canceled again. It's as bad as I've seen it. You can have all the sales you want, but what if you can't ship them?" a second twitch exporter in the Midwest US said.

Since the beginning of the year, containerized shipping has become significantly more expensive and hard to book for many US market participants.

Making up for China's shortfall

While both Asian and US aluminum alloy markets have been affected by automotive demand disruption, the Asian market remains chronically undersupplied because of low, inconsistent ingot shipments out of what was once the region's largest smelter: China.

Asian, European, and Middle Eastern aluminum alloy producers looking to grow their Japanese ADC12 market share have benefited from China's sluggish alloy output over the past several years. China's high bar for import standards means fewer suppliers capable of delivering a clean product and consequently less raw material for marking alloy.

China exported 48,270 metric tonnes (t) of unwrought aluminum alloy in the first quarter of 2021, off by 10pc from 53,954t a year earlier. Meanwhile, first quarter 2020 exports of alloy were off by 60pc from 135,814t in the same period of 2019.

China's import standards have been steadily tightening for years and are now so tight, very little zorba goes directly into the country without a secondary cleaning stage in Hong Kong. And recently, even cleaned up containers of zorba have been sent back and rejected by Chinese authorities, calling into question the long-term viability of high-grade zorba exports to the country.

Companies investing in new media systems hope that by floating zorba to make twitch, then polishing the twitch in rotating drum systems, normal trade between China and the rest of the world will resume, instead of continuing to experience flurries of rejections as has been the norm for the past few years.

Malaysia has become the primary destination for US zorba exports, replacing China because of its less stringent import standards. But there growing concerns the country could crack down on zorba, taking a cue from China, which would make cleaner raw materials like twitch the natural replacement.

By John Betz