Scrap merchants selling into the UK secondary aluminium sector will be looking to export more if following the demise of MG Rover, which stopped production and went into administration in April. The secondary smelters' struggle to survive will be hit further as the industry calculates that between 5,000-10,000 tonnes of aluminium castings will be removed from the UK market each year.
The slip in UK prices of ingot and scrap since the announcement has been blamed on the troubles at the car plant. However, export prices are reported to be holding up as demand from China and India remains strong.
But for all the criticism that the ailing Longbridge plant should have closed five years ago, the delay has given the secondary aluminium industry, which is increasingly reliant on the automotive market, a breathing space in which to reduce its exposure to MG Rover and diversify its customer base.
As the UK market for aluminium castings for car components shrinks, there may be a structural adjustment in the longer term as sources of new production scrap dwindle. But the overall balance could be helped by the fact that as more and more aluminium goes into new cars, dismantlers of end-of-life vehicles will be looking to recover more in the future.
Preston Recycling of Preston, Lancashire, says that brake and bumper parts are an example. In one attempt to anticipate the new regime brought about by EU directives, suppliers of brake parts to BMW are planning to stamp them with the alloy number to make them easier to recycle. The only problem could be the cost: depending on the market in the future, the price of low grades may not make recovery economically viable.
In the meantime, UK scrap merchants are increasing their expertise of buying and selling in the world-wide markets. Exports of aluminium scrap from the UK in 2004 were 22,000 tonnes higher than in 2003 and are expected to rise again this year. In a strange cultural twist, this year, for the first time, three scrap merchants are among the winners of the Queen's Awards for Enterprise for their contribution to international trade.
Strong demand for scrap from overseas is good business for UK ports too. Several expansions are underway to take the extra volumes, including the opening of the Sims Group's new deep sea facility at the Queen Elizabeth Docks in Hull in March. Ferrous scrap merchants are benefiting too: in the last two months, Dunn Brothers has opened a second facility at Avonmouth and a new collection and export yard at Barry, South Wales.
The fate of MG Rover may not be finally settled, however. While Shanghai Automotive has abandoned any interest it ever had in buying the car company, it appeared last week that two Russian business men were making positive noises about an acquisition. Nikolai Smolenski already owns British sports car manufacturer TVR, and Oleg Deripaska is the boss of the world's third largest primary aluminium producer, Russian Aluminium, and of Russian car manufacturer