Red Sea shipping crisis disrupting aluminum scrap trades in Asia, UK: BIR

The Red Sea shipping crisis is disrupting aluminum scrap trades in India, Pakistan, Southeast Asia, the Middle East and the UK, according to International Recycling Bureau BIR's regional non-ferrous markets reports March 20.

It is having a "ripple effect" on aluminum freight rates and scrap availability in India, BIR said.

"Imported scrap has become expensive and delayed arrivals have added to the woes of India's recyclers," said Anirudha Agrawal of Indian rolled products and secondary aluminum producer Manaksia Aluminium Co.

"Rising scrap prices and falling refined metal values have cut deep into the margins of recyclers, who are finding it commercially lucrative to raise the share of primary metal in the raw material mix," he said.

Aluminum alloy demand is strong on the back of healthy order books for the automobile and aviation sectors, with prices rising to Rupees 205,000 ($2,470)/mt delivered to customers in India, Agrawal said.

Zorba 95/5 prices climbed 9% from $1,818/mt CFR Nhava Sheva in October to $1,966/mt this month, while Tense prices increased 6% from $1,575/mt CFR Nhava Sheva to $1,669/mt.

"An upward trajectory is anticipated in alloy market prices owing to domestic material shortages coupled with delayed arrivals of imports," Agrawal said.

Pakistan's domestic non-ferrous market is being stimulated by growing demand from Chinese smelters and consumers, particularly since Chinese New Year, mainly for aluminum and copper secondary ingots, said Aamir Malik of Pakistan's ABM Corporation.

"However, scrap supply continues to be tight owing to a lack of recycling activity and high costs," Malik said. "Closure of Red Sea routes to leading shippers has impacted the cost of materials through a higher logistics and financing burden, with delivery times almost 2.5 times longer than normal."

There's "a huge shortage of materials," he said.

Stella Ying Wang of Canada's American Iron and Metal, representing Southeast Asia, noted freight rates fluctuated considerably in the wake of COVID-19 but had been steadily returning to pre-pandemic levels.

"However, developments in the Red Sea have once again disrupted the delicate balance of global trade, causing rates to surge and sending shock waves through the industry," she said.

In the Middle East, the shipping disruption has broader implications for competitiveness of manufacturing, construction and recycling industries in Gulf Cooperation Council countries, which rely heavily on maritime trade for their non-ferrous scrap imports and exports, said Rami Shahrour of Lebanon's Sharmetal Trading.

In China, tight aluminum scrap supplies from domestic sources have been supporting the ADC12 ingot sales price, with profit margins also narrowing in recent weeks, added Shen Dong of US scrap group OmniSource Corporation.

In Germany, official 226 aluminum ingot prices remain stable but there is a significant gap between the lowest and highest ingot values, leading to a wide range of prices for recycled aluminum, reported Murat Bayram of UK-based European Metal Recycling Ltd.

In the UK, Gareth Hyams of APM Metals Ltd. said that the government's recent budget announcement swayed the exchange rate in the UK's favor, helping trading, especially on secondary aluminum exports.

However, "scrap generation and availability are set to be challenging while Red Sea issues continue to impact material flows in and out of the UK and Continental Europe," Hyams said. "With the construction and manufacturing sectors remaining weak, non-ferrous still appears readily available to merchants and end-users in the UK -- but just not in the volumes they were once seeing."