Sideway spreads with a side of supply shortage

First and foremost, our hearts go out to those affected by the bridge collapse in Baltimore.

While the collapse mainly impacts the auto industry, reports suggest minimal impact on scrap. Maersk has already excluded Baltimore as a port of call, rerouting most shipping lines to nearby ports.

There’s a noticeable tightening in aluminum scrap supply, fueled by concerns about dwindling resources. While some spreads, like UBCs, have risen above 70, others, such as secondary cast, turnings, and twitch remain sideways.

The tightening supply poses a significant challenge for mills struggling to meet demand. Speculation abounds that major manufacturers might be driving up prices for painted siding and UBCs. Despite the consistent rise in MWP, the tightening spreads are hindering the gains people were hoping for.

Finally, the awaited copper rally since last April has arrived. However, despite efforts to capitalize on it, there’s a lack of supply for support. If this trend continues, the tightening of copper spreads will be inevitable.

Chinese buyers of copper scrap are cautious about narrowing their purchases, but may reconsider if prices dip below $4, especially with May Comex copper prices down over 6 cents from last week. Notably, the May/Jul spread stands at 305bp, prompting speculation about its tightening in the coming month.