According to a report in the Wall Street Journal,
the aluminum scrap business is booming thanks to the trade war between Washington D.C. and Beijing.
Aluminum made from recycled scrap made up the majority of the aluminum used in the U.S. for the first time last year, according to market forecaster Harbor Aluminum Intelligence Unit LLC, which tracks U.S. government reports on aluminum production and scrap usage back to the 1920s.
"There's a huge win for domestic recyclers and producers," said Chairman of the Aluminum Recyclers Council (ARC), Luke Palen, president of Spectro Alloys Corp., which separates aluminum from other scrap metals and recycles it into alloys used by car makers. The Minnesota company is buying more sorting equipment and adding a furnace to melt more scrap.
The Trump administration's tariffs on foreign aluminum drove imports of the metal down 20% last year, Harbor Aluminum says, while domestic production rose 20%. Pushing up U.S. aluminum production was the tariff's intent.
Domestic aluminum smelters are unable to supply enough aluminum to satisfy demand, even with higher production last year. Instead, much of the increase in domestic production to offset lower imports has come from the processors that make aluminum from scrap.
China also implemented more-stringent quality standards on U.S. scrap exports early last year that started to drive down exports, and then it followed with tariffs totaling 50% on U.S. scrap aluminum, creating a glut for U.S. recyclers to remelt into new aluminum.
"It is a complete buyers' market," said Matt Kripke, president of Ohio scrap broker Kripke Enterprises Inc.
The U.S. generates more aluminum scrap than any other country. Much comes from old automobiles, demolished buildings and factory waste. Inventories were rising before China tariff took effect. Vehicles sold during the automotive boom following the 2008 recession are reaching the end of their lives, providing the U.S. scrap industry with a burgeoning supply of junked cars.
That nationwide scrap heap grew more rapidly after Beijing's trade barriers squeezed exports. As a result, prices for aluminum scrap salvaged from shredded autos in the U.S. are down by more than 20% from a peak in early 2018.
The scrap-metal glut could grow. China last month said it would require import licenses later this year that could restrict shipments of certain types of high-quality scrap aluminum, copper and steel.The tariffs and other restrictions could be unwound as part of a trade agreement between the U.S. and China, but talks between U.S. and Chinese officials have yet to yield concrete results.
Not all scrap processors benefit from the glut. Companies that buy and sell scrap aluminum but don't process it into new metal are hurt by the low scrap prices. Schnitzer Steel Industries Inc. in mid-January reported a 35% decline in profit from its business that sells mixed-metals scrap recovered from shredded cars.
But companies that do make aluminum parts and products from scrap are doing well. Indiana-based scrap processor Metal X Inc. plans to start melting scrap into aluminum ingots for the first time by 2020.
Norway's Norsk Hydro AS A is using more recycled aluminum to make extrusions that manufacturers use in window frames, auto parts and air conditioners, among other applications.
"We're trying to use more scrap," said Tim Chimera, Norsk Hydro's U.S. director of metal procurement.