For those of you that don’t know me, I’m Michael Anderson, VP of Marketing for Schupan. I have 17 years of industry experience working in commercial, operations, supply chain, and value add roles. Prior to joining Schupan in 2019, I enjoyed a long tenure at a major aluminum FRP (flat-rolled product) company. 100% of my career has been focused on aluminum and, in particular, aluminum scrap.
I simply love this time of year. It’s when snowflakes start to fly, time is spent with friends and family, and annual contracts for the coming year start to take shape. This year has proven a little more difficult and drawn out than years past as overall demand in the aluminum world has been pretty depressed. Thanks to a dramatic rise in interest rates, 2023 was the year of crumbling sales books and consumer destocking which had scrap generation far outpacing demand. As a result, spreads widened to historical levels on nearly all grades.
Heading into 2024, inventories at consumers are much better aligned with the new reality and while order books haven’t necessarily rebounded, they have at least stabilized. Spot needs, however, remain muted as consumers are filled up with 2023 commitments through year end and many mills use Q4 for preventative maintenance and furnace relines/rebuilds. I do anticipate there being much more spot activity in the marketplace come January as a consistent theme among consumers this year was the desire to dial back annual agreements and participate more in the spot market and focus on monthly or quarterly agreements. The reasoning for this is two-fold. Sales forecasts for 2024 remain quite murky in this high cost of capital environment and many mills experienced FOMO while spreads on scrap had widened out last year but they didn’t have any appetite to participate above and beyond their contracted volumes. There is a bit more optimism for a back half of 2024 demand uptick with hopes of an election cycle bump and this time next year should prove most exciting as two new fully integrated FRP mills are set to come online in 2025. I guess what I’m saying is, the worst is most likely in the rearview mirror and the future for aluminum is bright – hang in there!
While spot activity should pick up in the first quarter and that might spur some tightening of spreads on scrap, I’m not sure we should expect any massive swings in pricing. The LME has been relatively range-bound for much of 2023 and the 10 day, 100 day, and 200 day moving averages are all within $50/ton – so aside from some sort of headline we’re probably going live in this 2000 and 2350 range we’ve been in. The Midwest Premium looks to have a little upside in store though as the futures market and replacement costs seem to be outpacing the current premium by a few cents.
I look forward to having the opportunity to share more of my thoughts with you relative to supply/demand, markets, and scrap in the coming months. If you ever have questions, feedback, or thoughts on topics you would like me to cover, feel free to reach out to me at 440-813-6325 or michael.anderson@schupan.com.
Enjoy the holidays and we’ll catch you in 2024!
