During April and May, most of Mexican industry was idled - including the secondary smelters that supply it. As a result, domestic scrap demand for casting of secondary ingots and auto parts was basically reduced to zero. According to Harbor Aluminum, the impact was approximately 40,000 tonnes per month and so close to 80,000 tonnes would have been lost over the two-month period. Most secondary aluminium producers plan to go back online from June 1 but at this point it remains uncertain at what capacity they intend to operate, with estimates ranging from 30% to 70%. Clearly, the situation is extremely fluid.
Lack of clarity in government guidelines, combined with a dose of caution, has resulted in most scrap yards shutting for a couple of weeks or drastically scaling down their operations. Several industrial scrap grades evaporated from the market because those generating them were idled, while the different post-consumer grades have observed differing fluctuations.
During April, volumes through Mexican scrap yards were at typically 35% to 60% of their regular numbers and no clear picture has emerged yet for May.
Scrap yards have found demand support in the export market, mainly from Asia. Scrap values are not bullish but there is demand for almost all grades.
GDP forecasts for Mexico this year have been further downgraded from +1% before the COVID-19 outbreak to -5% last month; current forecasts range anywhere from -7% to -10%. No matter what the final number, it will be a hard year for the Mexican economy.
While all countries are envisaging complicated outlooks, I am sure our sector will be key to producing value for our society.
Glorem SC (MEX), General Delegate of the BIR Non-Ferrous Metals Division