US aluminum billet prices rise on very strong extrusion demand

Wednesday, Aug 16, 2017

US aluminum billet prices have firmed in recent weeks as extrusion demand remains strong, but most extruders remain unconcerned about potential supply issues and are not inclined to book ahead for 2018.

A couple of suppliers, by contrast, said they have already made a start on 2018 contracts, and say spot supply appears to have tightened slightly.

"Extrusion business is the best I have seen in years ... some lead times are out almost 20 weeks," one extruder said Tuesday. "Business is so good, it is bad!"

The Platts weekly spot 6063 billet upcharge was assessed at 9-10.5 cents/lb plus P1020 Transaction price, delivered US Midwest, last week, up from 9-10 cents in July. The assessment is for North American primary or secondary 6063 billet, 7-8-inch diameter, net-30 day payment terms.

A remelt billet producer said he saw spot sales at 10-10.5 cents, up from 10 cents in early August, while a trader heard an extruder had to pay 11 cents for spot billet due to issues with imports. "Demand is very good," the remelter said.

The extruder, who also casts billet, said he saw billet and log upcharges going up in the short term and long term. "Nobody has any capacity, and the imported stuff has dried up," he said.

Another casting extruder said he had "heard of increases," and saw spot upcharges at 10-10.5 cents for 8-to-10-inch diameters.

Another remelter said he had not made any spot sales, but added: "We are filled up with contract customers who continually want more that we can't satisfy."

An import billet seller, however, said he still saw major suppliers selling at 9-9.25 cents in the competitive Ohio area, and two Midwest extruders confirmed that they saw 9-9.5 cents available.

"Spot is probably 9-9.5 cents," said one of the Midwest extruders. "I know 9.5 cents for sure is available because we did some for August delivery." The other said he had not gone out for any spot billet, but was hearing 9.5 cents offered. "I haven't heard any 10 cents," he said. "Earlier in the year it was like 9-9.25 cents, so it's up maybe half a cent."

The first extruder agreed. "I could see the cheap numbers going away, but only back to where we think the market is, which is to 9-10.5 cents," he said.

The change has been more pronounced outside of the Midwest, due to shrinking supplies of imports at ports. One of the extruders, who had been seeing 8 cents, or less, delivered near southern ports easily available in June and July, said current spot upcharges could range anywhere from 8 cents to 11 cents depending on freight.

The import billet seller, however, said he had sold at 7 cents FOT ports and saw 8 cents still available in the Southeast. He had started working on 2018 contracts and saw others doing the same. "When [sellers] start this early, it's a sign there is plenty of supply out there," he said, noting that "customers are not eager to lock in yet."

The source believes 2018 contracts would likely see lower annual upcharges than the 9.5-11 cents range seen for 2017, even as low as 8 cents delivered in Texas.

One of the extruders said it is "too early to start on 2018 contracts," but said he'd had a couple of preliminary conversations, and that one import supplier had indicated he might be able to drop the contract upcharge by 0.5 cent to around the 9 cent level.

The first remelter, who was also starting 2018 talks, saw the opposite. "Billet premiums are strong. We are already locking up folks for next year with modest increases," he said, noting that the labor contract expiration at the Aluminerie de Becancour aluminum smelter in Quebec "will still be a concern towards the end of the year."

The ABI collective labor agreement expires November 22, and during previous negotiations the smelter sometimes saw slowdowns affect its output, particularly of billet, which requires more expertise. The smelter is owned 75% by Alcoa and 25% by Rio Tinto and produces 450,000 mt/year through three potlines.

A union source said Tuesday the smelter is producing billet as usual, and its total product output had been stable, but that some pits may have been closed during some summer weeks and production shifted to T-ingots due to vacations and retirements of some of the experienced billet casting personnel. He said this is not unusual in the summer and that he had not heard of any billet customers being affected.

ABI and the union, United Steelworkers Local 9700, have not been negotiating, but the union will send a negotiating notice to the company by early September, at the latest, as the law requires, the union source said. From that date, there is a 90-day delay before the union could strike or the company could lock out workers.

A source with a Canadian extruder said billet shipments from ABI have been normal. "As far as we're concerned everything is status quo," he said, adding: "And we don't see any issues coming up for next year."

One of the Midwest extruders said he had been advised to shift a few planned ABI orders elsewhere during the summer and had done that just in case.

All of the extruders said demand was strong across most key segments, including automotive, building and construction and office furniture.

"We're still booked pretty solid, and people are saying [the] second half is going to be every bit as strong as the first half," one Midwest extruder said.

The extruders saw plenty of suppliers offering into the North American market. "From what I've heard in the market, we don't have any reason to worry about supply for next year," the Canadian extruder said.

The extruders had also not seen any shipment problems from Hydro Aluminum, despite it notifying customers that it might experience delays in August due to new export routes for its Qatalum smelter in Qatar.

"We've seen no delays; we're getting everything on time, and they are one of our best suppliers," one of the extruders said. Another said Hydro had substituted some of the Qatalum billet with supply from another import source, but they were having no issues with the shipments.

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