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European aluminum alloy shows signs of more interest, prices stable

Tuesday, Aug 27, 2013

Spot inquiries picked up slightly in the European aluminum alloy market this week as the summer vacation period began to draw to a close.

"The market was OK this week, we had some inquiries where we were able to book some quantities. It was better than last week," said one producer, adding that the inquiries had been for September/October delivery.

A second producer agreed: "The beginning of this week saw a lot of inquiries for early September."

The producer reported selling 226 at prices around Eur1,800/mt, delivered with 30 days' payment terms.

"Prices are more or less stable. The lowest we've heard was Eur1,800," said the first producer, adding that they had achieved sales in the Eur1,830-1,850/mt basis, delivered 30 days.

There was still talk of cheaper offers below the Eur1,800/mt level, however.

Looking ahead to Q4, two large auto parts producers are in the process of discussing their fourth-quarter aluminum alloy requirements with suppliers.

"I have [the inquiries] on the table," said one producer, adding: "Volumes are better than last year. It's looking very healthy." The eventual price agreements with the two large consumers are likely to set the tone for the market in Q4, sources said.

"That will really establish the situation," the second producer said.

While prices dipped over the summer, the trend going into Q4 should be firmer, the trader said.

"No matter how you talk to, everyone still has scrap problems. That's why I think prices will go up," he said.

One possible optimistic sign for producers who have seen margins squeezed by high input costs could be the recent uptick in metal prices on the London Metal Exchange, which if sustained may generate more scrap availability, he said.

The LME cash settlement price for primary aluminum was $1,835/mt Friday, up 6% from $1,732/mt on July 31.

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