AMU Survey: Scrap demand rebounds in August

Aluminum scrap demand rebounded among recyclers in August, making signs of tighter availability more notable than they were under July’s weaker demand.

Recycler demand increased while fewer respondents reported sufficient obsolete scrap, even as inventory drawdowns remained widespread. Price expectations also moved away from lower levels as export demand returned to the improving response category.

Aluminum scrap demand rebounds

In the previous survey, about 40% of recyclers reported declining demand. Only 10% reported improving demand that month.

However, that shifted in August. No recycler reported declining demand. About 40% reported improving demand, while 60% reported stable conditions.

The months prior to July provide some moderating context, though. Two-thirds of recyclers reported improving demand in May, before falling to 14% in June. August doesn’t return recycler demand to the May distribution, but it does reverse June’s and July’s deterioration.

Inventory drawdowns persist under stronger demand

Recycler inventory management, on the other hand, barely changed from July.

About 67% reported drawing down inventories down in August, compared with 70% in July. Another 17% kept inventories steady, while 17% reported building inventory.

While July had a significant share of recycler respondents who reported drawdowns, it sat beside a 40% share of declining demand. August saw current recycler demand stable-to-improving while recyclers continued to note drawdowns.

Inventory drawdowns can also result from deliberate efforts to limit working capital when demand is weaker. At the other end, strong demand can force an involuntary drawdown when consumption outpaces replenishment.

The obsolete scrap availability results lend some support to the latter explanation. Fewer recyclers reported sufficient availability as demand increased, although a majority still said enough material was available to meet demand. Obsolete scrap also represents only one segment of the broader aluminum scrap market, so its availability wouldn’t necessarily explain overall inventory movements.

Obsolete availability becomes less sufficient

Fewer recyclers reported enough obsolete scrap to meet demand in August.

Sufficient availability responses fell to 60% from 80% in July, while the remaining 40% reported insufficient supply.

That was the lowest sufficient share among recyclers going back multiple months. All recycler respondents had reported adequate supply in May.

The non-recycler response pool moved much less. Excluding recyclers, roughly 88% noted sufficient obsolete scrap availability, little changed from July.

Most recyclers reported increasing demand while fewer considered obsolete supply sufficient for current requirements. That said, it does not establish a broad shortage, as 60% still reported adequate availability.

Export demand returns to growth responses

Aluminum scrap demand in the export market also largely reversed direction.

No recycler reported improving export demand in July. About 78% described it as stable, while 22% reported decline.

In August, 40% reported improving export demand and the remaining 60% noted stable conditions, with no declining responses.

Broader survey results also moved toward stability. About 79% reported stable export demand, the highest share in the survey question’s history. Declining responses fell to 7% from 31%.

The recycler movement carries added weight because scrap represents most US aluminum export volume. Scrap accounted for 68% of US aluminum exports from January through June, according to Department of Commerce data compiled by Global Trade Tracker.

Midwest Premium views diverge by company role

The overall Midwest Premium result changed little in August.

About 31% expected a lower premium, up from 28% in July. Stable responses remained near 44%, while the higher share eased to 25%.

Segregating recycler answers, no respondent expected a lower Midwest Premium in August. About 80% expected stability, while 20% expected a higher premium.

In July, 40% of recyclers expected a lower premium. Another 40% expected stability, while 20% expected a higher result.

Every lower premium response in August came from outside the recycler group. For context, about 46% of non-recycler respondents expected a lower premium.

May was the last month when no recycler respondents expected a lower premium. Still, recycler respondents were split evenly between stable and higher responses, as opposed to the 80/20 split in August.

UBC expectations move back toward stability

Used beverage can (UBC) expectations changed in the same general direction among recyclers. The share expecting lower UBC prices fell to 17% from 40%. Stable expectations increased to 50% from 30%.

About 33% expected higher prices, little changed from July 30%.

July produced matching 40% “lower” reading among recyclers for both the Midwest Premium and UBC. While lower responses disappeared entirely regarding the Midwest Premium question, about one-fifth of recycler respondents still expected lower UBC prices.

The Midwest Premium results add context to both possible interpretations of recycler UBC expectations. About 80% of recyclers expected the premium to remain stable and 20% expected it to increase, while 17% expected lower UBC prices.

If those respondents meant outright prices, a lower LME cash settlement could pull UBC prices down even with a stable Midwest Premium and an unchanged percentage buying spread.

Conversely, if they instead meant a lower buying spread, the outright price would also decline unless an increase in the LME cash settlement was large enough to offset a wider buying spread.

Forward views lose the oversupply category

Recycler three-month supply expectations shifted away from oversupply in August.

Half expected a balanced market in August and the remaining half expected undersupply.

In July, around 40% of the group expected balance, while undersupply and oversupply each accounted for 30%. June also included a substantial oversupplied share, at 29%. May’s results had a significantly higher undersupply share than the subsequent two months, at 40%, but still had respondents expecting oversupply as well.

Scrap processor outlook differed slightly from the non-recycler market, where forward expectations shifted more decisively toward balance. About 67% of respondents expected balanced conditions over the next three months, while 25% expected undersupply and 8% expected oversupply.

Putting it together

August’s recycler results show aluminum scrap demand strengthening from July without describing an outright shortage of scrap.

Current demand strengthened, export demand moved toward improving and inventory drawdowns remained widespread.

At the same time, fewer recyclers reported sufficient obsolete scrap availability, and three-month expectations shifted entirely out of oversupply.

August therefore looks less like an immediate shortage than a market where demand has strengthened relative to available scrap and respondents have become less comfortable with forward supply.