Secondary Scrap Demand for Aluminum

Secondary Scrap
Demand for Aluminum
Platts Metals Week
Aluminum Symposium -January 17,2012
Gary Borner
Vice President
Spectro Alloys Corporation
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Who is Spectro Alloys?
What makes up the “Secondary”
Industry?
What markets are competing for
secondary aluminum scrap?
What is the outlook for secondary
aluminum scrap?
How is scrap correlating with the different
indices?
Key Points
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Spectro was established in 1973 and has
been under its current ownership since 1989.
Spectro Alloys has become a leader in
providing comprehensive product offerings to
a changing aluminum casting industry.
Spectro produces over 50 different individual
customer specs in 5 different alloy groups
2011 marked a strong recovery year with
sales revenue exceeding $225 million
2012 Forecast for Volume requirements will
exceed 200 million pounds of aluminum scrap
2012 Capacity 130,000 m/t
Who is Spectro Alloys?
Spectro has 2 reverb furnaces that have
300k and 200K lbs. holding capacity.
 Spectro has 2 de-lacquering drier
systems.
 Spectro has a 1000hp Hammermill
Shredder capable of supplying over
20,000 pounds per hour of shredded
aluminum to the furnaces.
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There are approximately 16 individual secondary
aluminum recycling companies with 22 plant locations
in the United States.
 Of these 16 companies, 3 are captive to larger
organizations.
 The characteristics and roles of these companies
provide a reliable market for the scrap collection and
processing market.
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◦ Secondary recyclers provide a core domestic market for
scrap aluminum.
◦ Secondary recyclers provide the bridge financing between
the scrap source and the end user of aluminum alloys.
◦ Secondary recyclers provide additional processing and
cleaning of scrap via on-site shredders and driers allowing
scrap dealers to turn over their inventories quickly.
What makes up the “Secondary
Industry”?
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Today’s secondary aluminum recycling companies have
carved out individual niches that make them more
financially secure than those of a decade ago.
Different than tolling scrap aluminum, secondary recyclers
add value by providing casters with high quality,
customized specification alloys that have been filtered and
de-gassed.
What this market is looking for from the scrap processing
industry is:
◦ More long term agreements tied to Platts or LME NASAAC
◦ Help with regulatory and compliance/ EHS issues in the way they
package/process their product
◦ Better segregation of scrap types by alloy and class
◦ A renewed understanding of the secondary industry scope along
with long term commitments to the industry even with the lure of
all of the “export opportunity”.
Industry Comments
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Automotive castings which covers powertrain,
engine components and some structural
parts accounts for almost 80% of the market.
Non-Automotive Engines makes up and
additional 11%
The larger segments of the balance is
Appliance, B & C, Recreational products,
Lighting and Electrical / Industrial.
Die casting shipments projected to grow in
2012 at 8% while automotive is closer to
10%
Specification alloy end markets for
die castings.
Source: NADCA
247,680,000
3,528,000,000
4,748,791,680
Secondary Smelters
1,470,000,000
Toll Plants (non dross)
Export
Mill
4,682,454,147
Others
Secondary Scrap Markets
Markets for aluminum scrap exceed
15 billion pounds
Source: Export Data from AMM, others from Spectro Industry Data(Mill data is incomplete)
Secondary Smelters Requirements
380 and 319 type scrap
required
(>80% of the mix)
Lo Cu type scrap
required
(<20% of the mix)
1
3,528,000,000
Approximately 3.5 billion pounds will be consumed in
2012 by specification aluminum (Secondary) recyclers
400,000,000
350,000,000
300,000,000
250,000,000
200,000,000
Secondary Recyclers Growth
150,000,000
100,000,000
50,000,000
2012 Growth
Nasaac Stocks
2012 estimated growth in secondary recyclers
consumption vs. NASAAC stocks in pounds.
Source: Spectro industry data and LME Warehouse stocks report.
149,720
in M/T's
70000
60000
50000
40000
30000
NA Stocks
20000
10000
Bal
Chi
Det
LB
Lou
MO
NO
NASAAC stocks by warehouse,
45% in Chicago and 33% in Detroit
Source: LME Warehouse Stocks Report
Ingots
Sows
Ingots
Sows
Ingots
Sows
Ingots
Ingots
T-Bars
Sows
Ingots
T-Bars
Sows
Ingots
T-Bars
Sows
Ingots
0
STL
Source: Platt’s Metals Week
01/04/12
12/04/11
11/04/11
10/04/11
09/04/11
08/04/11
07/04/11
06/04/11
05/04/11
04/04/11
02/04/11
03/04/11
01/04/11
12/04/10
11/04/10
10/04/10
09/04/10
08/04/10
07/04/10
06/04/10
05/04/10
04/04/10
02/04/10
03/04/10
01/04/10
Axis Title
2010 - 2011 Platts A380.1 vs. Platts Auto Shreds
0.4000
0.3500
0.3000
0.2500
Spread
0.2000
Avg Spread
Spread Adjusted for Recovery
0.1500
0.1000
Margin variation for recyclers
Nasaac Cash vs. Platts Auto Shreds HG
0.3000
0.2500
cents / lb
0.2000
0.1500
Spread
Avg Spread
0.1000
Spread Adjusted for Recovery
0.0500
0.0000
Margin destruction for recyclers
with LME indices
Source: Platts Metals Week and Spectro
Industrial
Peddler
Scrap
Scrap
Auto
Salvage
Scrap
Scrap Dealers /
Marketers Supply Funnel
Scrap comes in….
“Secondary”
recycler
Export
Choices
Toll (Rotary)
Where will it go?
Mills/Cast
Houses
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Newer markets for aluminum scrap will continue to grow.
North American demand will grow as “re-shoring” will
accelerate in the next few years.
China’s population and labor force will peak in the next 5
years potentially redirecting where scrap will be sent
Exports will continue to grow along with the domestic
market segments.
Primary aluminum will be a “wet blanket” for scrap prices
as more consumption converts from P1020 to scrap for the
foreseeable future.
Margins will tighten as competition for scrap increases
while aluminum prices climb a wall of worry.
Consumers will need to collaborate to change how the pie
is cut.
Trends and take aways
 Thank
You!
Platts Aluminum Symposium