All aluminum producers will use high % of scrap produce primary products. Really? Platt s Aluminum Conference Jan All Raw Materials Consulting 1

Transcription

1 All aluminum producers will use high % of scrap produce primary products. Really? Platt s Aluminum Conference Jan 2015 All Raw Materials Consulting 1

2 North American Perspective The expected growth spurt for aluminum sheet penetration for light vehicles is not unprecedented in the aluminum history in North America Source Ducker Intelligence Thousands of Metric Tons Can Sheet North American Total Flat Rolled Aluminum Consumption History and Forecast Years of no growth Auto Sheet Years 2.2 million tons 13 Years 2.8 million tons All Raw Materials Consulting 2

3 Automotive Aluminum Growth Body sheet alloys: 6111, 6022, 6016 (Outers) 5182, 5484, 5754, 5052 (Inners) Primary mill closed loop recycle with OEMs Grades of cast alloys gaining in popularity : 319, A 356, and A 390 Major focus is on 319 with restriction in Iron content 0.4%, Zinc 0.4% B356 alloy with Iron being tightened to 0.2%! Major growth of foundries in the High Integrity Die casting business. Many European auto suppliers are building new foundries in NA Structural castings facilitating the use of aluminum panels Typical examples are: Inner door structures, Suspension components Sub-frame assemblies, Compartment side inner rails Shock mounting housing, casting towers, front suspension housing Body pillars etc. All Raw Materials Consulting 3

4 Automotive Aluminum Growth Popular new cast alloys are primary based and are driven by proprietary compositions. Aural 2,3,5 alloys (A 365 )( Rio Tinto-Alu Suisse ) Silafont 36,AA-365 (Rheinfelden) Calypso 61D Castasil 37 Trimal -05 Mercalloy A367, ADC 3SF All these alloys have low iron less than 0.12 and very low copper ( ) (Copper is controlled to lower levels as this affects weldability) These alloys are currently in the primary manufacturers domain and command a higher premium over 20 c/lb than the normal foundry alloys. There will be a growing trend to reduce cost and will tend to move to high value recycling having access to prime scrap. All Raw Materials Consulting 4

5 Infamous Scrap Gap History of Scrap Gap?: 1950s: Post WWII sales growth 1960/70 s: Die Casting demand growth Late 1980 s: UBC recycling 1990 s: Engine Blocks and Heads 2000 s: Global/China Demand 2010 s: Primary Smelter UBCs & 2015 Aluminum Sheet Closed Loop Recycling Begins All Raw Materials Consulting 5

6 Infamous Scrap Gap Is there a difference this time? Fundamentals suggest likely: Primary demanding scrap closing gap between primary and secondary alloys prices Price spread between P1020 and Secondary past 2 years is unprecedented correlated range Unless significant additional scrap becomes available (unlikely) and/or primary smelter demand falls, tight price spread between primary and scrap will continue China/Korea will remain net short scrap continuing to import significant volumes of scrap Scrap is key driver of sustainability : Significant global recycling of beverage cans Auto Sheet Producers committed to significant use of scrap All Raw Materials Consulting 6

7 As NA approaches a steady state on aluminum sheet shipments for light vehicles, end of life aluminum sources and the closed loop recycling of engineered scrap will decrease the need for primary aluminum to 45% in 2035 from 80% in 2015?????????????????????? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Body and Closure Metal Sources Old Scrap Prompt Scrap Primary Input End of Life Scrap Prompt Scrap Input Primary Input 0% All Raw Materials Consulting 7

8 Questions Will political environment change in US/World and lower Oil $ take pressure off CAFÉ and light weighting in 2017? Will consumers be willing to pay for the higher cost of light weight vehicles? Will Primary sheet producers and OEMs manage closed loop scrap effectively? Will the shift for high quality scrap result in even more competition with low iron 319/356 cast alloy growth? Will primary aluminum sheet producers develop a process able to recycle post consumer scrap efficiently? Will scrap industry develop efficient post aluminum intensive alloy separation? Will OEMs standardize aluminum auto sheet alloy? All Raw Materials Consulting 8

9 Kevin s Forecast Sustainability will increase in importance to OEMs, but will be awhile before it is the deciding factor in source selection Current lower gasoline $ will reduce pressure by customers on OEMs for improved MPG Primary aluminum production must/will increase Expansion of rolling mill capacity by producers will continue and ultimately over capacity. In 10 years? 20? 30? Battle for scrap and tight spreads will continue Aluminum sheet producers will have limited capability in melting post consumer scrap Scrap industry and metal converters will develop low cost post consumer scrap recovery with significant % ultimately used in automobile sheet Closed loop recycling will require significant participation from scrap management companies and aluminum scrap converters All Raw Materials Consulting 9

10 Thank You Kevin Moore All Raw Materials Consulting All Raw Materials Consulting 10

11 Impact On Aluminum Scrap Industry There will be an Evolution NOT a Revolution Near-Term Impact: Engineered Scrap: Closed loop recycling directly between OEM/Tier 1 stampers and rolling mill Post Consumer Scrap: Minimum current generation with limited segregation by alloy All Raw Materials Consulting 11

12 Impact On Aluminum Scrap Industry Long-Term Impact: Engineered Scrap: Closed loop recycling directly between OEM/Tier 1 stampers and rolling mill Scrap management and alloy converter OEM s/tier 1 Stampers decide to direct sell Post Consumer Scrap: Traditional manual segregation Advanced segregation by alloy if economically viable If aluminum scrap can not be used in primary applications, secondary alloy $ likely to disconnect from primary alloy $ All Raw Materials Consulting 12