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Aluminum alloy ingot prices fall; turnaround said likely near

Saturday, Mar 10, 2007

While spot prices of aluminum die-cast ingot, made from scrap, slipped by 1 to 2 cents a pound during the past week, a turnaround could be around the bend as the market seems to be near bottom.

"If the hedge fund managers and the Chinese will leave the fundamentals to operate, prices should go up a bit. The market seems to be bottoming out," one participant in the spot market said.

The downward pressure came from futures trading and, for some sellers, from reduced expectations about spring sales quantities.

The 2-cent declines on the spot market are for the costlier grades of secondary ingot. That's partly because of cues from the London Metal Exchange, where primary aluminum for prompt delivery has for several months been costlier than three-month metal, an unusual tilt. That oddity, which is now disappearing, didn't affect the North American Special Aluminum Alloy contract.

Consequently, aluminum's decline from the Feb. 26 peak on the LME, for prompt material, has been 4.5 cents a pound for the alloy but 9 cents for prime material. That contrast, with an impact on certain grades of scrap, has helped produce the recent 2-cent declines for A360.1 and A413.1 ingot.

The alloy used in wheels, 356.1, has come under particular downward pressure in the spot market, apparently due to a combination of robust capacity and weak demand, one source said. The price differential normally granted for the alloy's low-iron variant has nearly vanished, he added.

AMM's secondary ingot price now shows ranges of $1.04 to $1.06 a pound for A380.1; $1.10 to $1.11 for 319.1 material; $1.15 to $1.17 for 356.1; $1.12 to $1.14 for A360.1; and $1.12 to $1.14 for A413.1 product.

A 2-cent price reduction was also posted by the largest smelter group, Wabash Alloys LLC, Wabash, Ind.

That action seemed a grudging acknowledgment of what has already occurred in the marketplace rather than a precursor of a further decline. The revised Wabash Alloys values are $1.06 a pound for A380.1 and $1.13 for 319.1 material.

The public reduction by Wabash of its selling prices could stiffen the company's resolve to trim the cost of its scrap supply, as warmer weather improves the flow of recyclables.

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