Drop in European manufacturing tightens aluminium scrap availability

A resulting anticipated increase in support to aluminum scrap prices may consequently squeeze margins for alloy makers that consume scrap, sources told Fastmarkets.

“The [German] metal market has entered a quieter phase owing to the summer recess at many plants. Remarkably, the official price for 226 ingots has decreased for the first time in a very long period. Expectations of any surprising demand shifts over the summer remain low. Despite this slowdown, availability of recycled raw materials remains significantly limited,” BIR board member Murat Bayram said in the industry body’s monthly report.

Germany’s industrial sector continues to experience a downturn, evidenced by latest data from the Federal Statistical Office, Bayram said.

In May, the sector saw a further decrease in orders, with a 1.6% drop compared with the previous month. This marks the fifth consecutive month of decline.

Analysts had expected a modest increase of around 0.5%, while year-on-year, orders have fallen by 8.6%, Bayram added.

According to the Federal Ministry for Economic Affairs and Energy, the data suggest a subdued industrial outlook in the coming months.

“Only with the further recovery of global trade and the gradual revival of demand for industrial goods will order intakes likely stabilize,” the Ministry noted, according to the BIR’s non-ferrous metals division.

Fastmarkets’ published prices for DIN 226 aluminum ingot, the most widely traded grade in mainland Europe, have been dropping in recent weeks after strengthening for much of the past quarter. Germany, along with Italy and Poland, has had the highest pricing due to steady demand from the automotive sector, while most of the rest of mainland Europe has seen lower prices.

Fastmarkets’ latest weekly price assessment for aluminum pressure diecasting ingot, DIN226/A380, delivered Europe, was €2,380-2,480 ($2,595-2,705) per tonne on July 12. This compared with €2,310-2,400 per tonne on May 14, around the time of the last BIR regional scrap overview of Europe.

Fastmarkets’ latest weekly price assessment for aluminum scrap floated frag, delivered consumer Europe, was €1,750-1,840 per tonne on July 12, compared with €1,760-1,800 per tonne on May 14.

Eastern Europe

With mainland Europe is approaching the August break, when many factories and yards will be closed for maintenance, the usual slowdown in business activity at this time of year has resulted in reduced scrap availability in Poland, according to the BIR.

Aluminum alloy producers can expect a harder second half of 2024, with Siemens, Volkswagen and BMW seemingly losing their place in the electric cars race with China, it said.

“Russia’s secondary aluminum producers are struggling to find homes for their metal amid the drop in orders from Asia. Several producers are reporting increased stocks and not being able to move their metal,” BIR board member Natallia Zholud from Poland said.

The cash price of aluminum indicated on the London Metal Exchange will also be influential on the purer grades of aluminum scrap, as well as higher grade secondary aluminum alloy.

The LME Aluminum Cash (May 24) official price was $2,403.50-2,404.50 per tonne on July 15, compared with $2,509-2,510 per tonne on May 14.

United Kingdom

The BIR report noted that the UK economy increased by 0.6% in June, with services being the key part of that. But while services growth was revised upward, increases in manufacturing were revised downward, once again affecting the supply of metals to be recycled, Gareth Hyams, BIR representative for the UK, said.

“Even though the market is still healthy and demand for non-ferrous is still there, volumes remain steady, but scarce in some parts of the country,” Hyams said. “On the export side, Asia seems to have taken a step back on certain grades, making Europe and India the go-to destinations for merchants at present.”

Southern Europe

The secondary raw materials markets in Spain and Italy were reportedly subdued and expected to persist with that trend through the current quarter, according to the BIR report.

Demand has been decreasing for secondary aluminum, with lower numbers starting to emerge on aluminum ingots and secondary raw materials.

When compared with the first quarter of 2024, Spain’s economy increased by 0.3% in the second because of increased household spending, strong imports and the start of the high tourist season, the report noted.

The Spanish economy is expected to continue growing, overtaking most European economies, with and anticipated 2.4% increase in the country’s gross domestic product (GDP) for the whole of 2024.

Still, while manufacturing industry and industrial production have also continued to expand, Spain is still struggling with a high unemployment rate which has even exceeded the expected 11.8%, the report said.

In Italy, consumption showed a recovery in June after declining by 0.6% in May, recording a 0.9% year-on-year gain in June due to spending on goods and services for mobility.

Within the sector, consumption for cars recorded an increase of 25.7%, although heavy industry continued to decline, while investments and exports held their ground, but were not outstanding, the BIR said.

Nordic countries

In the Nordic countries, there have been mixed signals, and according to the BIR report there was not enough material coming in, with a lack of activity, difficulty selling and high freight and logistics costs. 

Overall, market sentiment is not that positive and there is still less material available, the report said.

Competition for scrap material is tough, with even the smallest deals turning into a big fight and margins adjusting downward accordingly, the BIR said.

Some smaller yards are struggling for their existence, while others are happy not to have the big overhead costs of the bigger companies, it added.

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