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Russian AK5M2 scrap aluminum stable at $1,630/mt CIF Japan following steep decline

Friday, Nov 02, 2018

   Prices of Russian AK5M2 scrap aluminum ingot have been stable at around $1,630/mt CIF Japan in the last few weeks, but it was too early to tell if the market has bottomed out after a $200/mt price decline since August, Japanese market sources said on Tuesday.

  One Japanese trader reported a sale to a local secondary aluminum alloy smelter at around $1,630/mt CFR Japan for November-December loading from Russia, for 100-300 mt. Offers were heard between $1,620-$1,640/mt CIF Japan this week.
  The deal and the offers were for AK5M2 with maximum 1% zinc and 0.85% magnesium content. AK5M2 is a type of recycled scrap ingot made by melting scrap generated from cars, dismantled buildings, and machinery parts. AK5M2 is used as raw material for ADC12 and DIN226 aluminum alloys, that require higher silicon but lower magnesium and zinc content. ADC12 is used for car engines.
  The Japanese trader said the possibility of AK5M2 sliding further to $1,600/mt CIF Japan and below, is limited. Scrap feedstock is usually scarce in the fourth quarter in Russia as snowfall reduces scrap availability.
  "My suppliers tell me scrap prices are rising in Russia," he added. Half of AK5M2's scrap feedstock comes from auto scrap, and the rest dismantled buildings, oil pipeline facilities, and machineries.
  AK5M2 sellers have been able to conclude sales at above $1,700/mt to Russian buyers, the trader added.
  Meanwhile, weak DIN226 prices in Europe and the soft London Metal Exchange high-grade primary aluminum prices have kept a lid on AK5M2 prices.
  The Platts European DIN226 aluminum alloy prices were last assessed on October 26 at Eur1,385-Eur1,435/mt ($1,576-$1,633/mt), suggesting that DIN226 product and AK5M2 feedstock prices were almost on par, which has eroded any margins and production may have to be suspended. A price spread of $100-$200/mt is typically expected by producers, sources said.
  The LME primary aluminum price hovering below $2,000/mt this week has also affected the general sentiment, as prospective buyers of ADC12 in Japan have retreated to the sidelines. Buyers are waiting to see whether the LME aluminum prices would fall further, or find support at current levels.
  This week, European producers were heard offering ADC12 at $1,720-$1,730/mt CIF Japan for December loading. A deal was reported at this level for 200 mt.
  A second trader said the European market may be on a recovery track, as he was no longer hearing aggressive offers below $1,700/mt CIF Japan.
  European export sales at below $1,700/mt CIF Japan were possible if freight from Europe to Japan was at $50/mt, sources said.
  "There is not yet a clear direction, up or down," a third Japanese trader said.

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