*Average monthly settlement price, cash buyer; U.S. dollars per metric ton. Source: London Metal Exchange, www.lme.com.

Supply is outpacing demand for copper and aluminum scrap, sources say, with spreads widening in response.

A broker based in the Southeast says generation of aluminum scrap is steady to increasing, with many companies moving obsolete material to get it out before the end of the year.

Copper scrap is not fairing any better. “We are seeing excess supply being offered as the terminal market for copper is very strong, however, supply is outpacing demand,” a nonferrous scrap processor based in the Northeast says. “Most consumers and wholesalers are strictly controlling inventory, and it appears that between now and year-end, sales will be fairly weak.”

The processor characterizes domestic demand for copper scrap as stable, though it has been at lower levels than normal throughout the year.

In an Oct. 19 article, American Metal Market (AMM) noted widening spreads for copper scrap, reporting, “Discounts for brass mill No. 1 copper, refiners’ No. 1 copper and brass ingot makers’ No. 1 bare bright scrap stepped up by a penny. Meanwhile, brass ingot makers’ No. 1 copper, No. 2 copper and light copper scrap discounts widened by 2 cents, and that for refiners’ No. 2 copper jumped by 4 cents per pound” per its latest assessment.

The broker characterizes domestic aluminum scrap demand as “terrible,” adding that many consumers are “loaded” with scrap and have no need to buy until next year.

He says he’s heard aluminum scrap exports are increasing off the East Coast as of October, and AMM reports that this activity is helping to keep prices afloat, with smelter- and mill-grade scrap prices mostly unchanged.

The processor says Chinese interest in higher grades of clean copper scrap is growing as of late October. “We do not sell much export; however, our suppliers are being approached by exporters.”

He adds, “The potential that China may ban certain grades of scrap is having a major impact as North American recycling participants consider what to do with various grades of copper-content items that previously were best-suited for export; however, it is possible those will have to be processed domestically.”

As if the wider spreads and softer demand were not challenging enough, escalating transporting expenses are adding pressure. “The truck freight rates have skyrocketed and certainly are having an impact on an already stressed model for most industry participants,” the processor says.

The broker says he has been paying as much as double for trucking.

Higher scrap prices likely will not soon offset higher freight rates. The aluminum scrap broker doesn’t see a pricing rebound forthcoming, predicting wide spreads for the remainder of 2017 and in 2018.