Auto shutdowns hit secondary Al producers

Coronavirus-related shutdowns of US automotive plants are expected to cause a drop in secondary aluminum alloy demand, which has already forced some smelters to cut back operations.

A large smelter serving almost entirely automotive customers stopped receiving aluminum scrap on 24 March and will remain offline into at least April, two market participants told Argus.

Other secondary smelters remain running, but will likely face some level of curtailment over the next month as some automakers like Ford, Honda and Toyota have already pushed out their re-opening dates again from initial plans.

"We're still adjusting to what auto demand is doing at this time, day by day," another large secondary smelter told Argus. "We're still buying scrap, but we're still feeling it out. Demand is obviously reduced."

Secondary smelters purchase mostly obsolete scrap grades such as old cast, old sheet and shredded aluminum to make alloys used in cast automotive parts such as engine blocks, pistons and heads. While aluminum castings are consumed by other industries, automotive remains by far the most common application.

"We are receiving [scrap] and are operating at a significantly reduced capacity," a third US smelter said.

The brace for a drop in alloy production has already pushed down secondary aluminum scrap prices as less consumers compete for raw material. Prices for floated aluminum shred twitch are down by as much as 2¢/lb from the prior week, depending on the consumers, and are expected to fall further.

The automotive shutdowns have thrown cold water on an obsolete aluminum scrap market which had been firm until a week ago. Old cast and old sheet aluminum scrap both hit about seven-month highs in early March and late February, respectively, in part because slower flows of ferrous scrap nationwide tightened supply of obsolete nonferrous scrap as well.

By John Betz