"The warming weather and better steel prices have released some scrap units but not enough to get the scrap flow moving to lower prices," he added. Quotes for A380 grade aluminum are at 58-60 cents a lb, although some secondaries are attempting to quote 61-63 with no takers. West coast material was sold in the 58-60 cent range on a midwest delivered basis.

"If the LME continues to fall, some mills may decide to melt P1020 rather than the expensive scrap based on the tight differentials," suggested an industry source. "

This could result in the prime prices or premium levels of prime increasing, thus justifying the higher scrap prices." Friday's LME cash settlement price was 55 cents a lb ($1,214.50 pertonne). Premiums for midwest P1020 are currently quoted around 4 cents a lb. While market sources are looking for the tightness in auto shreds to ease up, availability is still scant.

One aspect that could effectively take some of the pressure off of the tightness comes from secondary producers substituting other grades of scrap in place of auto shreds. Auto shredder scrap is a basic item used to produce A380 grade metal. Secondary producers could substitute cast and sheet, mixed low-copper clips, and turnings, traders said. Another good substitute material is Russian origin aluminum scrap and there has been talk of further Russian material making its way to the U.S. in the near term. Prices for cast and sheet were quoted at 41-43 cents a lb, with some higher quotes at 45 cents, depending on the quality. Quotes for mixed low copper clips were at 45-47 cents a lb, and high grade turnings were quoted at 37-39 cents a lb.