Al wire, extrusion scrap prices diverge

The parity between aluminum EC wire and new, bare 6063 extrusion spot prices has decoupled by several cents per pound since March as scrap demand from extruders has softened while rolling mills are still targeting some P1020 replacements.

Buying spreads for 6063 scrap widened to approximately 23¢/lb under the midwest transaction price in the second week of August, down from 10¢/lb under during the same week a year earlier.

The few spot buyers of clean, bare 6063 extrusions are brokers fulfilling contract orders or secondary smelters attempting to buy material only because for now there is less direct competition with extruders.

The lack of spot buying by normal consumers of 6063 scrap explains its widening, several market participants told Argus.

"Nobody is buying spot extrusions right now. It's a disaster," one broker said.

"There's been a little bit of a downturn in terms of order books, so we've slowed down production to not have too much inventory. That's causing a buildup in scrap and prime," a large extruder told Argus.

A growing adoption of automotive clips has also contributed to less demand for scrap extrusions, as extruders attempt to capitalize on the glut of industrial grades.

While not all chemistries of auto scrap can be used, some are appropriate for casting 6000 series billets for common extrusion alloys.

Spreads for EC wire though, a high-purity grade with a wider range of buyers than extrusion scrap, have only widened to 20¢/lb under from 11¢/lb under for spot bids with 30-day payment terms.

The same week last year, both were trading within 1¢/lb of each other. In the most recent Argus assessment, the gap between the grades is 8¢/lb.

While rolling mill demand for common scrap grades such as mixed low-copper clips and painted siding is tepid, interest in high purity grades such as EC wire remains more resilient because it can be used as a substitute for higher cost primary aluminum.

This same supporting factor is not true for extrusion scrap, which is not commonly consumed at competitive spreads by rolling mills.