Aerospace slab and billet producers enjoying all-time high scrap discounts/profitability

Segregated 7075, 7155, 7050 scrap units are selling at discounts of around 35 cent/lb below the MWTP (LME + MWP).

We estimate that scrap currently represents around 50%-60% of aerospace slab/billet intake. According to our visibility, today´s long scrap market is allowing secondary producers involved in making 7xxx aluminum slab/billet to use at least 50% scrap as feedstock.

HARBOR can confirm segregated 7xxx scrap units are carrying today a discount of at least 35 cent/lb below the MWTP (LME + MWP) with plenty of material available as secondary smelters producing A380 alloys are not really competing for these units. Moreover, mixed 2xxx/7xxx material, which represents a small portion of their typical feedstock is selling at record discounts of around 70 cent/lb below the MWTP (LME + MWP).

In a Section 232 environment, duty-unpaid scrap units make a substantial difference to the bottom line of producers of aerospace slab and billet. Secondary aerospace slab/billet producers sell their product on a LME + MW duty-paid + slab/billet upcharge of around 25-30 cent/lb for this material, while they buy their scrap (half of their feedstock) on a duty-unpaid basis at discounts of 35 cent/lb below the MWTP. In the end, secondary slab/billet producers sell 100% of their material at 25-30 cent/lb above P1020 and buy at least 50% of their feedstock at 35 cent/lb discount below P1020. This makes for a very attractive margin.