By Katie Pyzyk
Aluminum appliances and beverage containers today don’t look all that different from those of 50 years ago, but aluminum alloys and their uses have continued to evolve, as has the aluminum market, with changes now coming more rapidly than ever.
In the short term, trade policy decisions by China and the United States have caused instability in primary aluminum prices and changed the global market dynamics for aluminum scrap. Long term, however, the more notable changes are to how manufacturers are using aluminum in their products and packaging. The drive for energy efficiency—whether to reduce costs or to lower carbon emissions—has resulted in major aluminum-consuming sectors switching to new alloys, new packaging designs, or more use of aluminum overall. When those products reach their end of life, the changes are affecting the products’ recyclability in ways that can increase costs or narrow the available markets. While the short-term volatility gets the headlines, the long-term evolution of aluminum use has just as much potential for disruption to recyclers’ operations.
Recent market disruptions
“Right now there is a lot of unpredictability in the marketplace” for primary and secondary aluminum, says Joe Pickard, ISRI’s chief economist and director of commodities. On the scrap side, “China really is changing the whole global market dynamic right now,” he says. Last year, as part of a sweeping overhaul of its scrap import regulations, China tightened its nonferrous scrap contamination limit to 1 percent, which forced U.S. exporters “to adjust what mix they’re offering to make sure it complies,” says Mike Southwood, senior consultant for aluminum at CRU (London).
Then in May, all scrap exports from the United States to China stopped when the Chinese government instated a one-month suspension on the U.S. operations of CCIC North America, the only firm authorized to conduct mandatory preshipment inspections. The suspension created delays and pile-ups of material already in transit or at the ports. At the end of the suspension period, China issued new, much more onerous rules for preshipment inspections of scrap that took effect June 1, requiring in-person inspections while each container is loaded. According to a June 6 story in American Metal Market, costs will include the inspection fee, an hourly rate for the inspectors’ time, a per-mile travel charge from one of CCIC-NA’s four offices in the United States and Mexico, and hotel, rental car, or airfare for the inspector. (At press time, ISRI was receiving reports that CCIC is imposing these charges on each company even when the inspector visits multiple companies in one trip. It urges ISRI members to question such charges and communicate with other companies as needed to prevent double-charging.)
Prior to the inspection changes, China’s new restrictions had not hit aluminum scrap exports as hard as they had hit, say, mixed paper and plastics, a certain portion of which is now getting landfilled due to the lack of alternative markets. It’s unlikely the “situation will be that dire on the aluminum scrap side, but there is a fear that eventually it may turn to that if the scrap loses all value,” Southwood says. Down the line, if prices for scrap aluminum—particularly Twitch, the ISRI specification used for most shredded aluminum scrap —“start to erode because of the sheer amount of material that’s around, that could pull down other secondary grades of scrap,” he says. Southwood suggests that processors “are attempting to figure out how to upgrade [Twitch] to a product that more people here in the United States can use” rather than relying so heavily on China’s consumption, “and [they] are trying to find new export homes for this material.”
Despite China’s efforts to clamp down on the type, quality, and quantity of scrap it imports, “metal is still flowing there because China is not self-sufficient in their aluminum scrap,” Southwood says. Indeed, “large, furnace-ready Zorba should still be a good commodity for [exporting to] China in the short term,” says Randy Goodman, executive vice president at Greenland (America), based in Roswell, Ga. (Zorba is the ISRI specification for shredded mixed nonferrous metals.) But he predicts that domestic processors and brokers will have difficulty identifying markets for Zorba measuring less than one-and-a-half inches in diameter. Further, China has announced that its goal is to stop all “solid waste” imports—which it defines to include scrap—by 2020. The United States exported nearly 1.2 million mt of scrap aluminum to China in 2017, the vast majority of which was shredded material, Pickard notes.
Domestic Policy Changes
U.S. trade actions also are affecting the aluminum market. In March, the Trump administration imposed 10-percent tariffs on imports of many aluminum products under Section 232 of the Trade Expansion Act of 1962, which allows the president to protect U.S. manufacturing on national security grounds. China responded with a 25-percent tariff on U.S. scrap aluminum, making U.S. scrap less competitive on the Chinese market. That has many exporters now seeking domestic outlets for their material.
Dave Roth, general manager of secondary smelter Transmetco (Huntington, Ind.), says the actions mean “not as many people are able to export scrap to China, which is a good thing for us”—U.S. scrap aluminum consumers—because “they will turn around and sell to me.” If the lack of export markets results in less aluminum being recycled, however, that could have a negative impact on his company. “When supply is down, when you’re not salvaging as many cars, then the scrap supply is tight, and our price goes up,” he says.
ISRI’s Pickard points out the potential positive side for recyclers and secondary smelters of the Section 232 tariffs on aluminum product imports: They have created the “expectation of a boost in domestic production of aluminum in the United States, and that should generate more scrap,” he says. The domestic supply of and demand for aluminum, “at least in the short term, is probably pretty positive for the scrap recyclers right now,” he says.
In April, the Trump administration announced new sanctions on about two dozen Russian oligarchs, companies, and government officials in response to “a range of malign activities” Russia undertakes worldwide, it said, most notably in Crimea, Ukraine, Syria, and online. The move dealt the aluminum markets a serious jolt because Rusal (Moscow), the world’s second largest primary aluminum producer, was on the list. After the sanctions announcement, “the price of aluminum spiked from $2,200 per ton to $2,700 per ton” on fears of a supply shortage, and then it plummeted, Pickard says. The Midwest premium on primary aluminum moved in a similar fashion, but aluminum scrap prices themselves were not as affected, he notes. Even so, aluminum scrap recyclers and traders find the roller-coaster market activity “very scary” because of the uncertainty of “whether [the price is] just going to drop like a rock or continue to stay at the levels it was at,” Goodman says.
If the short-term disruptions are not enough to keep aluminum recyclers up at night, long-term changes in manufacturers’ use of aluminum might do so. Many changes involving aluminum are designed to make products and packaging lighter. When it comes to energy efficiency, lighter is better. A lighter vehicle has better gas mileage; lighter packaging often means more can be transported in a given vehicle or container, which means fewer trucks on the road. In vehicle manufacturing, the focus on improving fuel economy “is driving the need for lighter vehicles,” says Sean Kelly, research assistant at the Metal Processing Institute at Worcester Polytechnic Institute (Worcester, Mass.) and director of the recycling and resource recovery branch of Solvus Global, a technology innovation firm also based in Worcester. One way carmakers lighten up is to “replace steel with aluminum and [other] lighter materials,” he says. These substitutions typically occur
in body and closure components, including vehicle frames, doors, hoods, and trunks.
The Ford F-150 is widely considered a game-changer as the first vehicle released with a nearly all-aluminum body. Other aluminum-body vehicles quickly entered the marketplace after that. “Jeep Wrangler, that is primarily an aluminum body. You’ve got Jaguars, you’ve got Teslas, all these other cars that, for lightweighting reasons, have moved to primarily aluminum bodies,” says Matt Kripke, president of Kripke Enterprises (Toledo, Ohio).
A report Ducker Worldwide (Troy, Mich.) conducted for the Aluminum Association’s Transportation Group (Arlington, Va.) in July 2017 found that the average net weight of aluminum per light vehicle increased from 84 pounds in 1975 to 397 pounds in 2015 and is likely to reach 466 pounds by 2020. “That obviously has implications on end-of-life processing,” Kelly says.
Growth in vehicle aluminum use beyond 2020 depends greatly on U.S. corporate average fuel economy standards, the report states. In May, the Trump administration proposed freezing those standards at the 2020 level for the 2021-2026 period. The Ducker report presents various scenarios for CAFE standard changes, with average aluminum use increasing to anywhere from 494 to 565 pounds per vehicle
Another approach car and truck manufacturers can take to meet CAFE standards is to move away from internal-combustion engines and toward electric motors. EVs require a “significant amount of aluminum” because the motors are less powerful than gas or diesel engines, Kelly says, thus the vehicles must be lighter to operate efficiently.
Lightweighting is “an issue not just in vehicles,” Pickard says, but also in a diverse range of other aluminum products, from beverage cans to containers for waste or recyclables. “The thickness of the aluminum sheet they’re using continues to get thinner,” he says. The result for recyclers is that they need more product to achieve the same scrap weight.
For decades, for example, aluminum recyclers could expect that “about 30 cans made a pound” of aluminum, Kripke says of used beverage containers. “Now it’s something like 42 cans make one pound. It takes a lot more collection to get the same weight of material.” Indeed, the Aluminum Association notes the average aluminum can weighs nearly 40 percent less than it did in 1972. Although lightweighting might reduce transportation and production costs for a manufacturer, the decreased material weight per product ultimately affects scrap processors’ bottom lines.
Alluring New Alloys
Auto manufacturing’s push for vehicle lightweighting increases the amount of aluminum in each vehicle, but it also drives demand for lighter, stronger alloys. Some of them “have only come into the stream in the last couple of years,” Pickard says.
While aluminum manufacturers tout the increased strength and formability of new aluminum alloys they’ve created for automotive applications, some industry participants note that the alloys are also a major marketing tool. If an aluminum manufacturer tweaks just one aspect of an existing alloy and creates a new one, it can sell that to a major automaker as a proprietary material exclusively used in that automaker’s vehicles. They “can say, ‘We’ve done the engineering, and for this particular application, we’ve come up with this specialty alloy that’s perfect for your process,’” Kripke says. “They’re working directly with engineers of automotive manufacturers.”
At the end of these vehicles’ life, however, the specialty alloys create a headache for recyclers trying to keep up with the changes. The alloys “seem to keep evolving,” Kripke says. “Five years ago, the one we saw a lot was 6111. Today, the big ones we see more of are 6022 and 5754,” and he hears about other ones coming into the stream. This creates a struggle for processors “trying to find the best homes for these new alloys,” Pickard says.
The aluminum manufacturers seem dismissive of recyclers’ concerns about finding markets for the new alloys, the recyclers say. The message is, “don’t worry what to do with this because you’ll never see it, it will all be handled in closed loop,” Kripke says. Instead, in his experience, the volume of new alloys arriving in scrapyards is growing faster than the demand for them on the market. “There’s so much of it out there that the market is trying to figure out what to do with this scrap,” he says.
“I was surprised to find the amount of automotive scrap that’s not involved in closed-loop processing,” Southwood says, considering the investments that have been made to create tolling arrangements between original equipment manufacturers and sheet mills. Some leakage into the market should be expected, but right now “there’s so much of it out there” and scrap processors will have to “separate and process the new alloys to really capture the value,” he says.
Further automotive aluminum changes are on the horizon. Expect a “major shift in the aluminum form that is used in vehicles,” says MPI’s Kelly. He expects vehicles will contain fewer cast aluminum elements—such as engine blocks—and more wrought products, especially as more electric vehicles come online. Currently, automotive aluminum is about “60 to 80 percent cast and 20 to 40 percent wrought,” he says, but projections indicate “almost a complete shift [to] 50 to 60 percent wrought and 40 to 50 percent cast” in the coming years.
Alterations in the types of aluminum entering the stream have implications for the composition of Zorba and Twitch. Right now, processors can shred vehicles along with various other items such as appliances to produce Twitch with a composition that “is favored toward developing a secondary cast alloy, … but that’s not a feasible solution moving forward,” Kelly says. If the industry doesn’t “broaden that secondary alloy spectrum beyond just secondary cast for engine blocks or transmissions,” domestic markets will end up with a surplus of aluminum scrap, he says.
Whether the problem is trade disruptions or new alloys on the market, some believe that the solution lies in increasing domestic aluminum scrap consumption. The United States is “heavily reliant on imports of aluminum to make aluminum products here,” Pickard notes. Others believe domestic scrap processors should be “considering more technology to get material cleaner and further separated,” Goodman says. That’s a favorable model for processors throughout Europe, he says, and it could catch on domestically for aluminum processing. Of course, doing so will “impact scrap processors’ operating costs because of the additional cost of sorting, processing, and trying to find a home for the material,” Pickard says.
But Goodman thinks aiming for cleaner, more segregated streams is a smart strategic move. Aluminum market changes are “a long-term issue, and to be beholden to one country or one consumer … is too limiting,” he says. “For the long term, you better have a place you’ll be able to ship your material,” and cleaner output is more widely desirable and valuable.
Katie Pyzyk is a contributing writer for Scrap.
Contamination is an issue across commodity streams. For aluminum recyclers and consumers, two sources of contamination have become growing concerns.
The domestic craft beer boom has created the first issue. Craft beer makers are moving toward selling their products in aluminum cans instead of glass bottles for a variety of reasons, including cost, easier shipping, and cans’ ability to completely block ultraviolet light, which can alter beer characteristics such as taste and freshness. But craft brewers, especially small ones, can’t always find can-printing businesses willing to take on new clients or produce the shorter runs they need or can afford. An easier and lower-cost option they’ve turned to for labeling is to shrink-wrap printed plastic sheaths onto unprinted cans. The shrink-wrapping process adheres the plastic sheath so tightly to the can that the labels “are not coming off in the normal delacquering process, and … it’s causing problems for scrap processors,” says Matt Kripke, president of Kripke Enterprises (Toledo, Ohio). The plastic is “there in the middle of these [aluminum] bales,” acting as hidden contamination, which reduces the value of the scrap.
A less common but also concerning issue is boron contamination in the aluminum itself. “It can cost hundreds of thousands of dollars to consumers” if borated aluminum gets in their melting furnace, says Joe Pickard, ISRI’s chief economist and director of commodities.
Luckily, borated aluminum is rare. “To the best of our knowledge, the only industry that is creating this high-boron [aluminum] scrap is … the nuclear [energy] industry,” says Tom Horter, president of Matalco (U.S.), a billet producer in Ohio and Indiana. Borated aluminum is used in spent nuclear fuel storage and transport containers because of its high thermal conductivity. “That’s the beauty of boron, it doesn’t melt” as easily as other metals, which makes it ideal for containing spent nuclear fuel, says Harry Dillman, cast products business unit manager at Pennex Aluminum (Wellsville, Pa.). Boron’s melting point is above 3,700 degrees F, more than three times higher than aluminum’s melting point of 1,221 degrees F. That quality also makes boron difficult—some say impossible—to tolerate in round ingot melting and casting. The unprocessed boron within processed aluminum “can distort the entire heat,” and the whole batch must be tossed, Dillman says. A few pounds of borated aluminum “will ruin an entire furnace,” he says. “If you get a few thousand pounds, it will ruin your entire week,” he adds, because boron “is very sneaky”: Lingering particles could taint subsequent batches of aluminum. “It can take a day, or days, to get out of a high-boron situation,” Horter says.
Aluminum cast product makers commonly add small amounts of titanium or boron to aluminum during billet and slab casting to “equilibrate the formation of grains across the whole cross-section of the cast products,” Horter says. This reduces the potential for product cracking during solidification. But “if there’s already an appreciable amount of boron in the molten batch that you’re going to use for the casting, the grain refinement is ineffective,” and cracks form in the final product, he says. “No matter what you do, it will crack. If it cracks, it is unsalable.”
Boron’s ability to render an entire furnace full of aluminum valueless prompts Pennex and other secondary smelters to train employees to recognize borated aluminum in their infeed material. “Start with specifically asking questions about the origins of [the] scrap and get educated about what these things look like,” Horter says. Thus far, visual inspection is the only consistently successful method for identifying this type of metal. “It’s not something you can pick up with a hand-held device,” like an X-ray fluorescence analyzer or laser-induced breakdown spectrometer, Dillman says. Catching borated aluminum before a purchase agreement is in place is important because after the fact, “dealing with a supplier on what they owe you for a bunch of metal that was bad, it doesn’t end well for anyone,” Dillman says.
Facing rapid change in aluminum markets, alloys, and products, recyclers try to adapt in ways that make economic sense.