Viewpoint: US zorba poised to rise in early 2020

US consumer prices for zorba could climb further in the first quarter of 2020 as the export market is expected to remain strong and three months of consecutive ferrous scrap price increases have done little so far to improve shreddable flows.

An uptick in Chinese secondary aluminum demand has sent the Indian market for US zorba up steeply, as the country scrambles to import enough zorba to cash in on higher Asian alloy prices. Still, the dash to import more scrap comes at a time when US shredders have generated less zorba because of tepid ferrous shred pricing.

In the fourth week of December,the US consumer price 95/2 zorba surged to 38-41¢/lb or its highest level since May, increasing by 18pc from the same week a month earlier. The increase followed seven weeks of higher Indian import prices.

US Midwest shredded ferrous scrap prices have been rising over the past three months, but even after increasing by 15pc to $270/gt in December trade, the grade remains off by more than $100/gt from the prior year.

Sustained low steelmaker prices for shredded ferrous scrap means lower scale prices from dealers, dragging on zorba generation. Some coastal shredders have even passed on export sales of zorba for fear of not being able to fulfill orders.

Ultimately, US zorba consumers expect scrap supply to improve in the first quarter, especially as weaker demand from China, over the lunar new year holiday in late-January, weighs on shipments of alloy.

Zorba squeeze lifts twitch

The higher prices for zorba are expected to send US prices for derivative scrap product twitch up as well, putting pressure on secondary aluminum alloy producer margins.

One US producer of twitch told Argus that he has stopped converting the zorba he buys to twitch and is instead getting it tolled to produce remelt scrap ingot until the market improves.

"The bad part though is that I don't believe that twitch prices have gone up as as fast as zorba," he said. "We have not been selling any twitch for that last two months because we are melting it ourselves to make 380 type sows."

US sales prices for twitch have only risen 1.5¢/lb over the past month to a midpoint of 41¢/lb from a midpoint of 39.5¢/lb.US prices for twitch input zorba have risen by 6¢/lb over the same period.

By John Betz