UK secondary aluminium smelters had a mixed year in 2004. In February, soaring prices for aluminium scrap forced Derbyshire-based Bernhard Metals to cut back its output of secondary alloys, and in March, neighbouring Calder, with 35,000 tonnes a year of secondary alloy production, went into administration. But two other major players - FE Mottram and Avon Metals - shared the benefits of a smaller playing field and had to miss their summer holidays to keep up with orders.
Prices for ingot jumped by £20 a tonne to take account of the higher scrap prices and diecasters decided that paying up was better than seeing more UK smelters go under. Competition from smelters in Asia and Europe underlined the fact that raw material prices have strengthened everywhere across the board.
It was competition for scrap supplies from China in the first quarter of 2004 that drove up prices, which spiked in March at $670-700 per tonne for exports of mixed alloy-old rolled cuttings. But without further corresponding rises in the price of secondary ingot, European aluminium alloy producers found their margins under pressure again. Exports of scrap from Europe were already on a rising trend, jumping from 150,000 tonnes in 2002 to 180,000 tonnes in 2003, according to Metal Bulletin Research.
But as 2004 wore on, reported problems with power supplies in China dampened Chinese demand and prices saw a correction. UK buyers were in a good position to meet orders from one of the key end-users of aluminium alloys - automotive - which has not shown as much weakness as expected under competition from central and eastern European casting and foundry operations.
This sector in the UK is not without its casualties, however. Hydro Aluminium's Leeds-based Hydro Aluminium Motorcast was due to close down at the time of writing, and Cosworth Technology announced last year that it will close its Worcestershire casting operation in June this year.
Although Chinese scrap buyers returned to the market later in the year, they were not quite so vigorous, and prices remained at a reasonable level, leaving European alloy producers in a more cheerful mood by December.
But they are still at the mercy of demand from China and waiting to see what happens over the course of the coming year. On the one hand, Chinese buying is expected to pick up again as the year progresses, but on the other hand, an import licence scheme was introduced on January 1 in an attempt to reduce the number of cargoes containing poor quality and hazardous material reaching local ports, and exports are slow to resume.
Exporters now have to be registered with the Chinese authorities, and then apply to ship either ferrous or non-ferrous material. Confusion has arisen, however, over mixed scrap and the Brussels-based Bureau of International Recycling is intervening to try and clarify the category. Nor is it clear whether, if companies registered for the new licence still have to apply to the state inspection company CCIC for pre-inspection.
For European traders, the fate of the US dollar is also an issue. Chinese demand for aluminium scrap is not going to disappear and if the dollar weakens too much, buying from the USA will make more sense.
World supply is extremely difficult to estimate, but the London-based International Aluminium Institute publishes data from its members (primary producers and their subsidiaries). In 2003 reported volumes amounted to 2.73 million tonnes of aluminium scrap. Of this, 1.45 million tonnes were new scrap (from various stages of industria