Twitch oversupply weighs on aluminium scrap in Europe

Oversupply of floated frag aluminium scrap (twitch) in Europe has pushed down prices for castings scrap (tense) to the same level as taint/tabor scrap in the last month.

Tense has historically traded around €100/t higher than taint/tabor. But taint/tabor 2pc and tense 2pc have traded at similar levels since mid-October. The grades were at €1,000-1,050/t in the latest assessment, on 23 November.

Recent trading ranges have been distorted by weak liquidity and lower sales volumes.

China's impurity restrictions on scrap imports and the change in its import tariffs have driven price convergence of the two aluminium scrap grades.

Europe has been oversupplied with zorba scrap because of China's reduced imports. Beijing's high import tariff has prompted US suppliers to redirect zorba exports to Europe, adding to existing stockpiles and pressuring prices.

European scrap processors have separated zorba into twitch and "heavies" (brass scrap) to sell at higher prices.

Twitch scrap is a useful feedstock for producing secondary aluminium alloy 226 and smelters have taken advantage of higher twitch availability at lower prices to purchase material.

This has impacted demand for tense, as smelters switched to use more twitch and consumption has increased proportionally over castings scrap.

But recent price increases for twitch could lift tense prices too.

High zorba stocks are now slowly falling as European processors scale back US zorba purchases because of high stockpiles of "heavies", which they are currently struggling to sell into China. In addition, suppliers have been processing zorba to produce twitch in order to export to India and South Korea, where higher prices and a stronger dollar have incentivised sales. This has helped to reduce the zorba stockpile in Europe.

Traders have also been stockpiling tense scrap because of lower prices. Unlike aluminium turnings scrap, which oxidise over time, tense can be stockpiled without deterioration in quality.

Certain European scrap traders are holding back sales until they can secure an acceptable profit margin. And some scrap traders closed their sales book after a lucrative first half of 2018, planning to resume transactions in the 2019 tax year.