Dealers split on Al can scrap buying amid pandemic

The response of US scrap dealers on taking in used aluminum beverage can (UBC) scrap amid the worsening coronavirus outbreak has been mixed, with dealers coming down on both sides of the question on whether to continue buying in order to mitigate spread of the virus.

Cohen Recycling, which operates 11 yards in Ohio, and others across the country have shut retail operations in order to minimize exposure to the public. Some have halted buying only UBCs over concerns the virus will remain active on used cans. The coronavirus is transmitted mostly by aerosolized droplets from coughing or sneezing, but can also be transmitted via infected surfaces, according to the US Centers for Disease Control.

But many others, including two other large, multi-location dealers in the Midwest, confirmed they are still purchasing UBCs and other nonferrous scrap, but with added protection measures in place.

"We have our sorters wearing gloves and being extra aware to not touch their faces," a small Indiana dealer said.

Low LME aluminum pricing might pose an ever bigger disruption to UBC supply than virus-related collection issues.

Recent, multi-year low LME prices will cause many scrap dealers to bristle at the idea of selling UBCs to mills and brokers at last week's spreads off the Midwest transaction price for P1020 because the outright price will end up much lower. Other sellers less sensitive to commodity prices that do not make their money on scrap sales, such as beverage distributors and beverage producers, will be less likely to resist.

Some US UBC contracts have force majeure clauses, but no seller with commitments wants to be the first one to exercise it, said a broker.

Because most US states rely on dealers to collect UBCs rather than state buy-back programs, consumers will have to convince a large part of their supply base to sell during a time when the LME is at a more than four-year low. Initial reluctance to bid at spreads dealers accept could cause a supply squeeze, even though March and April are normally months when overall UBC supply swells.

"We have not stopped buying UBCs as of this moment," a dealer with a handful of yards in Texas said. "I think there will be a shortage of all material, as I do believe we are headed to much worse conditions than we see right now."

Representatives from California and Michigan beverage container redemption programs told Argus that they are still "evaluating" the situation and did not yet confirm any suspensions.

Material recovery facility (MRF) cans will likely continue to flow from the municipal waste stream as many plants have automated systems.

By John Betz