AMU June survey: Scrap market sentiment moderates, primary/semi supply keeps pace

Midwest Premium expectations

June responses showed a clear moderation in Midwest Premium expectations, as respondents shifted away from higher price expectations and toward stable or lower views.

The share expecting a “higher” Midwest Premium next month fell to 23% in June from 50% in May. Of that decline, about 7 points shifted into the “stable” category, which increased to 45% from 38%. But roughly 20 points moved into the “lower” category, which rose to 32% from 12% month over month.

Distributors & traders shifted decisively toward stable and lower Midwest Premium expectations. In May, the subgroup split evenly among higher, lower and stable responses. But by June, no distributor or trader respondents expected a higher Midwest Premium. About 60% expected the premium to remain stable, while 40% expected it to move lower.

Manufacturers & assemblers gave a more mixed reading. About 38% expected a higher Midwest Premium, another 38% expected a stable premium and 25% expected a lower premium. Relative to distributors and recyclers, the subgroup remained more open to higher premium expectations.

Recyclers and scrap processors also lowered their expectations. About 57% expected a stable Midwest Premium, while 29% expected a lower premium and 14% expected a higher premium. That marked a departure from May, when recycler responses split evenly between stable and higher expectations.

Those expectations carry particular significance for scrap participants because a large share of aluminum scrap buying, particularly mill-grade scrap, references the Midwest transaction price, which combines the London Metal Exchange (LME) Cash settlement and the Midwest Premium. A lower premium can reduce the outright Midwest transaction price if the LME Cash settlement does not move enough in the opposite direction. It can also influence percentage-based scrap buying spreads, even when those spreads do not move in lockstep with the underlying transaction price.

The Midwest Premium results suggest scrap market participants no longer expected the same degree of premium expansion as anticipated in May’s survey. However, the shift was not entirely toward lower responses, as stable responses remained the largest category among recyclers.

UBC price expectations

Used beverage can (UBC) scrap price expectations became more divided in June.

The share of respondents expecting “higher” UBC prices increased to 25% in June from 18% in May. Meanwhile, “stable” responses fell to 44% from 73%. “Lower” responses rose to 31% from 9% month over month.

The change didn’t come from a clean move toward lower pricing. Instead, May’s mostly stable reading broke into more directional views on both sides, with a somewhat larger share moving into the lower category.

Recycler and scrap processor responses followed a similar pattern. In May, 83% expected stable UBC pricing and 17% expected higher prices, while none expected lower prices. By June, 57% expected stable pricing, 29% expected higher prices and 14% expected lower prices.

The recycler response therefore moved away from May’s stable reading and the drop in stable responses split evenly between higher and lower price expectations

Because UBC scrap is typically bought and sold as a percentage of the Midwest transaction price, respondents may have been referring to outright UBC prices, percentage-based buying spreads, or both.

For example, a 75% buying spread in June and a 75% buying spread in July would represent a stable spread, but if the LME Cash settlement and Midwest Premium declined over that period, the outright UBC price would still fall.

Since the LME Cash settlement and Midwest Premium have moved lower since the survey closed, some respondents expecting higher prices may have been anticipating firmer buying spreads despite lower underlying benchmark values.

Even so, the results fit the broader scrap market trend seen elsewhere in the survey. Recyclers moved away from May’s more settled price expectations, while the broader respondent pool showed more disagreement about near-term direction.

Obsolete scrap availability

Obsolete scrap availability remained broadly sufficient in June, although respondents were less unanimous than in May.

About 19% of respondents said enough obsolete scrap was available to meet demand in June, down from 93% in May. Meanwhile, the share saying there was not enough obsolete scrap increased to 21% from 7%.

Even so, the June reading remained above several earlier points in the survey’s history. The month-over-month change largely illustrates a pullback from May’s near-consensus view that obsolete scrap availability was sufficient.

Recycler and scrap processor responses accounted for much of that shift. In May, every recycler respondent said enough obsolete scrap was available to meet demand. By June, 71% continued to report sufficient availability, while 29% said supply was no longer adequate.

Distributors & traders also shifted responses month over month. In May, every respondent in that subgroup reported sufficient obsolete scrap availability. About 67% still viewed supply as adequate in June, while 33% said it wasn’t.

Manufacturers & assemblers moved in the opposite direction. In May, 75% reported enough scrap was available and 25% said it wasn’t, while every respondent in that subgroup reported sufficient availability in June.

Those differences may reflect where each subgroup sits in the supply chain.

Scrap recyclers and processors participate directly in the obsolete scrap market. Distributors & traders occupy a broader position, buying and selling primary aluminum, semi-fabricated products, scrap or some combination of those markets through domestic and international channels.

Manufacturers & assemblers generally purchase metal for production and generate prompt scrap rather than sourcing obsolete scrap. They observe raw material availability from further downstream, where purchasing activity, inventories and production schedules can matter more than collection rates. That perspective is consistent with other June survey results, as manufacturers & assemblers remained relatively more positive on demand.

Rather than conflicting, those responses point to different positions within the aluminum supply chain. Participants closest to collection and processing post-consumer scrap reported greater uncertainty about obsolete scrap availability, while downstream consumers continued to report available supply remained adequate for their requirements.

Overall, the June results suggest the obsolete scrap market continued to supply enough material to meet demand, although confidence in that assessment weakened among the companies most directly involved in collecting, processing and selling obsolete scrap.

Imports, exports, and domestic supply

Responses to questions on import competitiveness, domestic primary and semi-fabricated supply, and export demand changed less sharply than other June survey measures, although recycler responses diverged in several areas.

Import competitivness

Respondents saw little change in the import competitiveness of primary and semi-fabricated aluminum products. About 77% selected “no change” in June, up from 70% in May. Meanwhile, the share saying imports were becoming “more competitive” declined to 15% from 30%, while 8% said imports were becoming less competitive after no respondents selected that option in May.

Recycler and scrap processor response shifted more noticeably. In June, 75% reported no change in import competitiveness, while 25% said import primary and semi-fabricated products were becoming less competitive. By comparison, every recycler respondent reported no change in May.

New primary/semi-fabricated supply

Responses to whether new US primary and semi-fabricated aluminum supply is keeping pace with demand changed little at the headline level. About 60% said domestic supply was not keeping up with demand in June, compared with 58% in May, while the share saying supply was keeping pace edged down to 40% from 42%.

Recycler responses again moved in the opposite direction. In May, every recycler respondent said new domestic supply was not keeping up with demand. By June, that result reversed, with 67% saying supply was keeping pace and 33% saying it was not.

That shift differs from the obsolete scrap findings, where recyclers were less unanimous about availability.

Primary and semi-fabricated products compete with scrap in many consumers’ melt mixes. Strong scrap demand can reflect healthy production or substitution away from higher-priced primary metal, while weaker scrap demand can indicate lower metal consumption even if primary supply remains adequate. As a result, recyclers can view primary and semi-fabricated supply as sufficient while simultaneously reporting greater uncertainty around obsolete scrap availability.

Export competitiveness

Export demand also moderated in June, including among recyclers.

Across all respondents, the share reporting improving export demand fell to 11% from 50% in May. Stable responses increased to 61% from 42%, while declining responses rose to 28% from 8%.

Recycler responses broadly followed a similar May-to-June pattern. In May, 60% reported improving export demand and 40% reported stable demand, with no recycler reporting declining export demand. By June, 50% reported stable demand, 33% reported declining demand and 17% reported improving demand.

The export demand question carries greater weight for recyclers than for several other respondent groups because aluminum scrap exports are more exposed to global commodity markets. Conversely, exports of primary and semi-fabricated aluminum products often move through established North American manufacturing supply chains, particularly between the US, Canada and Mexico.

Most US aluminum scrap exports move into broader international markets, particularly Asia, where secondary smelters and other consumers compete for material trade data also show most US aluminum scrap exports fall under the broad “aluminum waste and scrap, not elsewhere specified or included” classification rather than categories for UBC or industrial-process scrap.

While that classification doesn’t identify specific grades, it suggests recycler respondents were largely commenting on conditions affecting the broader scarp market, where obsolete grades and shredded mixed aluminum represent significant export products.

Putting it together

The June responses suggest scrap market participants were less convinced conditions would continue tightening at the pace implied in May.

Expectations for the Midwest Premium and UBC prices became less one-sided, confidence in obsolete scrap availability weakened a bit among recyclers, and export demand shifted toward a more stable or softer reading.

Recyclers also reversed course on whether new domestic primary and semi-fabricated supply is keeping pace with demand, indicating they see less pressure coming from primary metal availability even as they express greater uncertainty around post-consumer scrap.

Meanwhile, manufacturers and assemblers generally continued to describe conditions consistent with steady production and adequate material availability.

The combination of both subgroups’ outlooks implies a growing difference between individual raw material streams and where companies sit within the supply chain, rather than a shortage or surplus developing across aluminum.

The June survey supports the view that scrap market sentiment became more distinct from views of the broader aluminum market. Recyclers moderated their outlook on pricing, availability and export demand while simultaneously becoming more likely to report new US primary and semi-fabricated supply was keeping pace with demand and less likely to view imported primary and semi-fabricated products as becoming more competitive.

The responses no longer describe a single market narrative across both scrap and primary/semi-fabricated aluminum as throughout much of the year.