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Aluminium business dries up in Europe ahead of Q2 negotiations

Wednesday, Jan 30, 2013

European aluminium trading volumes have fallen in the second half of January, as buyers and sellers look to out-wait each other ahead of negotiations for second-quarter deliveries.

Metal Bulletin’s duty-paid aluminium premium stands at $290-305 per tonne, while the daily duty-unpaid figure rolled over at $222.78 per tonne on Monday January 28.

Only a handful of spot deals have been reported to Metal Bulletin after buyers booked most of their first-quarter requirements on short-term contracts at the end of last year.

“We’ve still got contracts and are not buying any spot,” a consumer said. We’re waiting to see what happens on the spot market [before booking] for the second quarter.”

Additionally, overall volumes are down as consumers see lower volumes going to their own customers.

“The spot market is not quiet just because consumers booked last year for the first quarter,” a producer said. “Most booked around 70-80% of their [usual] needs for the first quarter, but there’s no extra demand.”

A second producer added that there were better conditions in other markets.

“Financing in Europe has gone down the drain, but we’ve got Asia and the US back as markets. The US is very healthy at the moment,” the second producer said.

“In Europe it’s a trench war – no one is willing to make the first move. Both traders and producers are trying to out-wait the consumers, and no one is offering at lower numbers to get business. They are just waiting,” the second producer added.

But market participants expect buying activity to pick up in March, as consumers will need to buy for the second quarter after last year’s “mating season” revealed that few were willing to sign contracts for terms longer than three months.

“There is demand out there. It’s not yet surfaced, but it will,” the second producer said.

When it does, premiums could go higher, as there is not a lot of available material on the continent. The tightness has been exacerbated by United Co Rusal, which has stopped offering duty-unpaid material in Europe other than the material it sells to Glencore in transactions that began in 2009.

“We were told to direct more material to markets outside Europe, which is mainly about expanding our share in those markets,” a source from Rusal said. “In Europe, the volumes we trade outside the Glencore deal do not make us a significant player, but we are in Asia. We’d rather concentrate on that market and be a very big player there.”

Though consumers have acknowledged the likelihood of higher premiums ahead of the second quarter, many are still not booking material while their own sales are uncertain.

“We assume some increase in premiums for the next quarter, but we’re reluctant to buy ahead,” the consumer said.

“It depends on the market situation. The whole value chain is waiting now.”

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