The UK's aluminium scrap market has tightened drastically over the past few weeks, leading to price increases of as much as 15% this year as buyers desperately seek raw material.

Cold weather has reduced the collection of household scrap, while long Christmas shutdowns have slashed the production of industrial scrap.

A stronger euro has also brought in continental competition for the available scrap units, adding to the existing competition from Asian markets.

What has exacerbated the tightness further is that it has come as a surprise to the UK market, which did not anticipate the accumulation of factors that has led to such steep price increases.

Many secondary aluminium ingot producers sold forward in December on the assumption that scrap prices would remain flat or even fall in the new year.

But prices have risen swiftly, leaving those producers scrambling for scrap metal just to cover their orders, never mind to set aside for new business.

Many of those holding scrap metal have been reluctant to release it before the Chinese market returns from its new year holiday this week, hoping for higher prices still.

But Chinese companies are seeing higher costs themselves, especially for labour, and may not be very keen to buy large volumes of scrap at current prices.

Should they prove disinclined to pay high numbers, scrap sellers could be forced to lower their offer prices in all markets, giving some relief to secondary aluminium ingot producers that have been struggling for a workable margin since last year.

Jethro Wookey
Twitter: @jethrowookey_mb