London (Platts) Spot prices for aluminium alloy 226 in Europe reclaimed lost ground this week, picking up on the back of some hand-to-mouth consumer demand--despite the readily available supply of material in the market.
Traders, producers and consumers were however divided on whether 226 prices were tracking prices for aluminium alloy on the London Metal Exchange. Some said that the two were no longer as closely correlated as they had been in previous months, while others were still of the opinion that fluctuating prices were paying in to 226.
Aluminium alloy was mostly heard around Eur1,940-1,980/mt on a delivered German works basis, including 30-day payment terms, not much changed from its level in the week of October 13. But, two weeks ago, market sources were very far apart over price ranges for 226 with a German producer insisting that prices were closer to Eur1,980/mt and a trader source putting prices closer to Eur1,900/mt, same basis. This week, however, sources agreed that trade had firmed up and prices were comfortably in the Eur1,940-1,980/mt range--if not even higher, according to some producers.
"The price is definitely higher this week," said a trader source, adding that demand had picked up and there had been a good flow of inquiries for the remainder of Q4 and Q1 2007. "For first quarter next year, prices are closer to Eur2,000/mt," the trader said, noting that there was no correlation seen between 226 prices and LME aluminium alloy prices. "Scrap is still very available," the trader said, suggesting that for this reason prices had not followed the LME's movements as much.
But, a producer source said scrap traders watched movements on the LME and then priced their material accordingly. "So when LME prices go up, so does scrap," he said.
A German trader said scrap prices were increasing and he believed it was due to the Chinese being back in the aluminium scrap market.
He said on 226 demand, buyers were coming in because they had seen LME prices moving higher. "They thought prices would go down further, but then when they started increasing, consumers came in to buy," he said, adding he had done deals around Eur1,960/mt--a jump from the level of Eur1,900/mt two weeks ago, when he told Platts that producers were selling at very low numbers just to keep material moving out of their works.
A consumer source said 226 prices had increased on the back of higher primary and secondary aluminium prices on the LME. "The trend must be higher because primary is strong," he said.
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