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European aluminum alloy prices under pressure in competitive market

Wednesday, Sep 06, 2017

Aluminum alloy prices in Europe came under some downward pressure last week as a number of large buyers stepped in to negotiate fourth-quarter prices.

Market sources said that at least six or seven large diecasters were seeking material and competition for sales among foundries had caused 226 ingot sales prices to fall by some Eur20/mt ($24/mt).

The price of 226 was also very wide-ranging with larger buyers paying Eur1,710-Eur1,720/mt delivered and smaller buyers spending up to Eur1,750-Eur1,770/mt delivered or even higher in some cases, sources said.

S&P Global Platts weekly assessment of standard-grade 226 ingot shifted lower to Eur1,710-Eur1,760/mt delivered Germany, plus credit, on Friday from Eur1,730-Eur1,780/mt a week earlier.

Prices for 231 alloy also fell in line with 226 ingot to Eur1,740-Eur1,790/mt delivered Germany, plus credit, from Eur1,760-Eur1,810/mt.

A European trader said that it had been extremely busy with a number of inquiries on the table.

"We began the week offering at around Eur1,770-Eur1,780/mt delivered but soon found that a number of buyers were pushing for much lower prices with a lot of diecasters seeking Eur1,710-Eur1,740/mt delivered," the trader said.

In Germany, which is one of the most competitive markets in Europe, a monthly buyer was understood to have fixed October quantities of 226 ingot at Eur1,710/mt delivered and 231 grade at Eur1,730/mt delivered.

Another German diecaster who was seeking Q4 offers last week said that initial offers were extremely wide-ranging at Eur1,720-Eur1,780/mt delivered.

The buyer said he would leave some quantities open but that he was not expecting prices to fall much further.

A third diecaster in Germany also fixed October/November quantities at Eur1,710-Eur1,720/mt delivered.

On the sales side, European producers were quoting 226 ingot at Eur1,730-Eur1,750/mt delivered Germany. Lower prices of Eur1,710-Eur1,720/mt delivered were negotiable for Q4 contracts, buyers said.

"We heard Eur1,710/mt was the lowest this week but also Eur1,750/mt is achievable for smaller buyers," a German alloy producer said.

Market prices in Italy were higher at Eur1,770-Eur1,790/mt delivered with longer credit terms. Prices in Spain were heard at Eur1,760-Eur1,770/mt delivered.


The downside potential for 226 ingot prices over the next few weeks appears to be limited given the current support the metals on the LME and exceptionally strong demand from the auto industry, sources said.

Silicon prices, which are one of the key input costs for 226 production, have also climbed, with grade 441 heard trading at around Eur1,950/mt delivered and 553 some Eur50/mt lower, the trader said.

Ingot prices have moved up steadily during the summer months and have risen some Eur50/mt since early July.

The German producer said that much lower production in Italy this summer had also been behind the firmer prices. A key Italian producer has had an extended maintenance turnaround at one of its three furnaces for five weeks (due to restart this week) instead of the usual two to three and this, combined with the LME moving up, has given 226 prices a push higher.

"The LME has been stable this week and hence scrap prices have remained steady but we could see higher scrap prices in the next few weeks," a German alloy producer said.

Aluminum scrap prices, after rising during the summer holiday period, have remained relatively stable over the past couple of weeks with mixed turnings still quoted at around Eur1,100/mt delivered Germany.

Scrap dealers watch both the physical 226 ingot prices as well as the primary aluminum values traded on the London Metal Exchange.

The LME's official cash settlement aluminum price pushed higher last week to $2,113.50/mt (Eur1,779.95/mt) September 1, up $17 from $2,096.50/mt a week ago earlier and an increase of over $220 from $1,890/mt on August 4.

Producers with easy access to European ports are continuing to eye the higher prices for aluminum alloy in both the US and Asia. In December 2016, a number of producers sold both ADC12 and A380 for export to Japan and the US, which tightened European supply in Q1.

A Spanish alloy producer said that he was currently looking at export markets and he had been offered $1,970/mt CFR for shipment to Japan.

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