Europe Al: Scrap narrows further on bleak 4Q outlook

European aluminium scrap prices narrowed this week on low alloy demand and, as supply levels grow in Europe, they will likely fall further in the weeks ahead on low production volumes among alloy manufacturers in the fourth quarter.

The Argus assessment for aluminium wheels delivered to Europe dropped to €1,300-1,350/t ($1,436-1,492) today, down from 1,300-1,380/t in the previous week on 13 September, while tense 2pc scrap delivered to European smelters and taint/tabor 2pc delivered Europe both remained unchanged, at €850-920/t and €840-900/t, respectively.

Argus assessed the weekly UK aluminium wheels price at £1,000-1,050/t delivered today, flat to last week, while UK cast scrap prices narrowed to £670-720/t from £670-750/t delivered.

The UK commercial turnings prices was assessed flat at £500-£530/t delivered, while UK old rolled scrap stayed at £600-650/t delivered.

In the UK, scrap prices are approaching levels at which third-party merchants may become disincentivised from operating between scrap sellers and buyers, as the margins available may not justify the fixed delivery costs.

"I can remember prices around here but that was 30 years ago," an alloy producer said. "People might not bother, and then prices will go the other way."

A second alloy producer was more sceptical that prices would recover strongly in such a scenario, as the off-cuts from manufacturing processes that produce certain scrap grades cannot just be stored indefinitely and must be moved eventually.

Fourth-quarter manufacturing levels in Europe are expected to fall well below previous years, particularly in the automotive industry, leaving little hope that the situation for sellers will improve markedly any time soon.

"I spoke to one customer in the automotive space and he doesn't expect anything to improve before next spring," a third alloy producer said.