October is here, which means a few things. Pumpkin spice is everywhere (not a fan FYI), chilly nights, playoff baseball, and annual scrap contract negotiations. ReMA’s annual Roundtable meeting was in Chicago last week and kicks off contract talks for the coming year. Over my time in the industry the outcome of this meeting has slowly morphed from getting deals booked to merely feeling things out for the coming year. A lot of reasons can be cited for this change but I think the biggest is just how volatile the markets are these days with all the industry changes taking place. Between new consumers, expanded melting capacities, a recent shift toward increased scrap consumption, ever-moving duties and tariffs (which can drastically affect sales mixes and profitability), there are a lot of things that are hard to nail down. Needless to say, this year is no different as 2025 deals, those that get done anyway, will start to take shape over the next 30 days. Calendar year 2025 be filled with a higher mix of spot business and shorter term deals as scrap suppliers utilize Q1 to complete a few of their carryover 2024 agreements (thanks to slower generation and collection rates) and consumers try to get a gauge on sales volumes and how the economy is going to respond with interest rate cuts and the election soon to be behind us.
While next year scrap spreads aren’t quite as clear yet, outlooks for the underlying aluminum basis seem to be favorable. After a healthy rise in LME last month (thanks to speculation the Fed was cutting rates and a weaker dollar), aluminum found more footing and climbed another 6c in September. Fueling the rise this month was China’s recent stimulus measure to fix a faltering economy. Beijing plans to inject about $140B into their local economy by way of boosting domestic consumer sentiment and demand. This is a monumental shift in policy thinking as China has typically opted to support supply instead of stimulating consumption. With domestic interest rate cuts starting to take shape in the US over the next few quarters and this stimulus measure from China, some experts are calling for higher commodity prices in the year ahead.
As of this writing (Sept 30), the port labor dispute highlighted in last month’s article is coming to a head and appears as though there will, indeed, be a strike affecting 36 ports all along the east coast and gulf. The projected price tag to the US economy of such a work stoppage is $5 billion per day and the White House has stated it would not use federal powers to block a strike. While military cargo and passenger cruise ships will continue to be handled by the ILA, shipping costs and transit times on everything else will be dramatically impacted. A one week shut-down would take about 6 weeks to unwind with the backlogs and delays compounding with each passing day. And if the strike isn’t enough, Hurricane Helene has ravished the southeastern US causing upwards of $75 billion dollars in damage. Devastating catastrophes like these tend to generate significant amounts of lower grade scraps that traditionally ship out of these ports and are soaked up by overseas markets. With a potential work stoppage, we will likely see more of these items staying domestic making this a situation one worth monitoring.
Until next month, when I’m still hopefully watching my Cleveland baseball squad try to wrap up a World Series victory, soak up the fall season.
Please reach out to me at michael.anderson@schupan.com or 440-813-6325 for aluminum pricing, to provide feedback, or just to say “hey”.
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