Beck Aluminum Industry News and Notes...

18:09 12Sep08 -PLATTS: Beck, Met-Al ink scrap, secondary aluminum alloy toll agreement Washington (Platts)--12Sep2008/609 pm EDT/2209 GMT US secondary aluminum smelters Beck Aluminum and Met-Al have signed a toll agreement whereby Beck will give Met-Al scrap, and Met-Al will produce secondary aluminum alloys for Beck, according to company officials. This deal, which Beck Aluminum Vice President Ed Cowan described as a "reasonable" toll fee, has essentially saved Met-Al from closing its doors. According to Cowan, Beck will buy all the scrap going into Met-Al's 5million to 6 million lb/month Racine, Wisconsin, alloy facility. In exchange, Met-Al will make the alloys to suit Beck's needs and release the material to Beck's customers. "We will send them the ingot orders we want them to make, "said Cowan. Racine produces mostly 356, with some production of 319 and piston alloys. It makes a limited amount of A380. Cowan said Met-Al makes similar alloys to Beck, so "it fits" that it can pick up Met-Al's existing customer base. Cowan said that for Beck's 6 million to 7 million lb/month Lebanon, Pennsylvania, secondary alloy plant, it buys most of its scrap in the Northeast Boston, New York, Philadelphia, Baltimore) but will now buy scrap in the Midwest area for Met-Al. "We want to buy as much [scrap] locally as we can." he said. He added that it also may switch some orders around between the Racine and Lebanon plants, depending on what makes sense freight-wise. "We want to optimize that mix," said Cowan. Beck will gain all of Met-Al's production for marketing: "They will not sell anything anymore," he said. He said Beck Aluminum has been going through an expansion and has seen its business increase dramatically. "Our plant capacity is full," he said. "On the ingot side, we do not have open capacity. We have more sales than we have capacity, so we have to buy stuff on the outside. Our plants are running flat out."  Beck sells more than twice its secondary alloy capacity. He said even though demand is slow -- up to 30-40% below year-ago levels in the automotive sector -- "we do not make as much metal as we'd like to make." He said this tolling agreement will allow Met-Al to also run at full capacity --"something they have not done in years."  Cowan addressed rumors in the market that Beck was buying Met-Al, saying, "We will evaluate how we operate together under the tolling agreement, and a decision will be made later if we decide to do something." Cowan explained that Met-Al had planned an "orderly shutdown" at some point, but this move saved it from that."This gave them a boost," he said. "It was a way for their business to continue and people to retain their jobs and the plant to run most efficiently. And it made sense for us to get additional capacity." Phil Eckert, executive vice president of Met-Al, told Platts that "we have been struggling in this marketplace here in the upper Midwest for the last year or two. We have not had enough manufacturing volume, and the opportunities Beck brought to us allow us to be competitive and brought manufacturing volumes back to us. This allows us not to have to look at the other side of it. At the end of the day, this is positive for everyone."  The news comes amid a 3-5 cents drop in secondary aluminum alloy prices, as smelters reported huge ranges in their offer levels this week as many fought to maintain their margins. The Platts assessment for A380 plunged 3-3.5cents/lb to $1.155-1.18/lb on September 11 from $1.19-1.21 on September 8,following a 4.5 cents/lb drop in the LME NASAAC cash settlement price since September 4. NASAAC dropped sharply in the middle of this week. Reported smelter buying prices for scrap, however, edged down only 1-3cents from September 8 to September 11, though they were down about 3 cents from September 4.      Actual A380 business was conducted as low as $1.15/lb, and on the low end of the range a diecaster said he was quoted $1.10/lb and another was offered$1.14-1.15. On the other end of the spectrum, a handful of producers were holding onto higher numbers, with quotes ranging from $1.175/lb to as high as$1.21/lb. Still no business was reported at these levels. One producer was quoting $1.19/lb on A380, but said he didn't move material at that level. "We haven't had any inquiries, and I think there is a good chance of another quiet week next week," he said. "But we're not pushing the panic button; we're not lowering our numbers." One secondary producer said he sold several truckloads of A380 at$1.15/lb. "I'm sure there are some wide spreads out there, but I don't know who would buy at $1.19 or $1.20 today," he said. Another producer quoting$1.19 for A380 admitted, "We haven't sold anything this week," he said. "Spot sales seem to be few and far between in the middle of the month." Most agreed that it would be at least another week until October sales trickle into the market, but one producer who was offering A380 at $1.21/lb, said he saw signs that customers were interested in fixed-forward contracts. "Folks are basically right now waiting to make a decision until the middle of next week," he said. "And some of them are speculating and looking to book volumes out even farther than October -- for the balance of the year. Some will come in and will do fixed forwards and other will just do month to month." In line with ingot, scrap dealers succumbed to softer demand by lowering their ranges. "There are definitely people looking for a place to ship their scrap, and they aren't happy about lowering their numbers, but there are people definitely looking for homes," a buyer for a secondary smelter said. Sales were thin as most secondary producers are well-supplied through the end of the month. "We're seeing marginally lower numbers, strictly because a lot of people have pulled out. We're not buying any scrap," another buyer said. --Tina Petersen, tina_petersen@platts.com --Meghann McDonell, meghann_mcdonell@platts.com

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