AMU Survey: Stability on the surface, fractures beneath

Buyers and end-market responses help flesh how demand is trending and explain some of the nuances of supply and demand.

Lead times

Overall lead times eased between August and September.

In August, more than a quarter of respondents reported lead times were extending. By September, that share dropped by nearly 10 basis points, as more respondents reported shrinking lead times. Still, stable lead times remained the majority both months.

The easing came most clearly from scrap processors, who said softer order books and oversupplied conditions translated into shorter queues.

Producers of semi-fabricated products showed a steadier balance, with fewer extensions but also fewer contractions. The shifts suggests that capacity constraints are not worsening, and in some upstream channels they are easing outright.

That said, there is an important distinction.

Respondents who reported shrinking lead times were tied to industries where extrusions and billet are the main products, a pattern that also shows up in the product-level lead time breakdown.

By contrast, those who cited extending lead times were concentrated in industries based around flat-rolled products, also a trend reinforced by lead-time results when viewed by product type.

Lead times by product type

The lead time for aluminum sheet grew by nearly a week-and-a-half.

In fact, despite the recent fire at Novelis’ Oswego plant, which produces a substantial share of automotive flat-rolled products, auto body sheet lead times softened slightly. It’s worth noting this product type already had elevated lead times and the longest of any product type the month prior: sheet, extrusion, and primary.

The fire also happened toward the end of the month and was still under investigation at the time.

Common alloy sheet lead times extended substantially, by almost two weeks, while can sheet lengthened as well by a full week. It’s difficult to determine why common alloy sheet lead times grew so drastically, but it was noted by a multitude of respondent types from manufacturers/assemblers to distributors/traders.

Meanwhile, lead times for both grades of mill-finished extrusion, 6061 and 6063, softened to an average of four weeks from slightly longer in August. This product category is tied closely to construction and automotive demand, both of which remain under pressure.

Demand and order books

When asked about current demand, respondents held steady. Roughly three-fifths chose “stable” in both months, with modest shifts away from “improving” and toward “declining.” In other words, the headline demand picture has not changed.

Order books told a different story.

In August, two-thirds of respondents described their order books as stable, with a fifth seeing improvement. By September, the share citing stability fell sharply while reports of declining order books more than doubled.

Scrap respondents drove much of this swing, moving from uniformly stable in August to mostly declining in September.

When broken down by the types of buyers respondents sell into, a divide emerges.

Companies supplying the building and construction sector reported stable demand in September, but this stability rests on an already long-entrenched, weak baseline. In contrast, respondents selling into automotive channels leaned more negative, with a greater share tilting toward decline.

Supply balance

Supply balance shows the core divergence in this market.

In August, undersupplied responses were common alongside balanced views. By September, balance became the center, but with an uptick in oversupply.

The oversupply is concentrated among scrap processors, who face abundant feedstock and declining order books. Meanwhile, producers – rolling mills, billet producers, extruders, and secondary smelters – continue to report balanced or undersupplied positions.

That said, again, product-level view reinforces a split. Flat-rolled products in September were more likely to be described as undersupplied, while extruded aluminum leaned more towards balance. Scrap products were tagged more toward oversupplied.

Inventory

Inventories shifted subtly from August to September. The majority in August reported keeping inventories steady, with a quarter drawing down. In the most recent month, the share “keeping steady” fell, replaced by a rise in drawdowns.

In keeping with the responses from recyclers/processors noting an oversupplied situation, they also accounted for the largest move toward drawing down.

Companies appear to be holding back on building up inventory aggressively.

MWP and UBC pricing expectations

Pricing expectations showed patterns that, at first glance, appear contradictory to other survey responses.

The Midwest premium shifted decisively from “stable” toward “lower,” indicating some easing even as overall demand across most product categories remained flat. Lead times for P1020 were stable on a month-to-month basis, as was the Midwest premium throughout most of the month.

Conversely, P1020 premiums in Europe have been climbing, which in theory should prompt U.S. buyers to lift bids in order to retain volumes that might otherwise be drawn to Rotterdam.

By contrast, when it comes to used beverage can (UBC) scrap, over 90% of survey respondents anticipate flat-to-lower UBC scrap prices. The share of respondents that expect lower prices more than doubled from August to September.

This shift comes despite resilient can demand, extending can sheet lead times, new beverage can sheet rolling mill capacity ramping up, entering a season when UBC prices often tick higher, and buying spreads already at historic lows. The oversupply conditions cited by scrap recyclers appear to be weighing heavily on sentiment.