European spot prices for aluminium alloy 226 broad ranging

Spot prices for aluminium alloy 226 in Europe were broad ranging this week, with producers and consumers uncertain over which direction the market was expected to take going in to 2007, traders, producers and consumers told Platts.

Aluminium alloy 226 ingot was mostly heard around Eur1,950-2,030/mt on a delivered German works basis, including 30-day payment terms, widening on both ends of the range from Eur1,980-2,000/mt in the week of November 9.

Three-months aluminium alloy on the London Metal Exchange last traded electronically at $2,340/mt at 1236 GMT Friday, but the contract had not traded on the floor.

"The market is very erratic," said an eastern European market source, adding that market players were being "very cautious" in the absence of clear market direction and demand levels for 2007. "But on the spot market trade is quiet--winter is coming," he said, adding that he had heard deals done anywhere between Eur1,950-2,100/mt.

A German producer said prices were creeping up and the market was "getting a bit tougher." "There is a big spread in the prices--especially between prompt and Q1," the producer said, reporting deals between Eur1,990/mt and Eur2,040/mt. "People have started booking for Q1, but while they made inquiries for large volumes they landed up booking for smaller volumes. Perhaps they think prices will come down," the source said. The producer said there was also less cheaper material coming in to Europe from Poland: "They normally offer bigger quantities to the market, but because exchange rates are bad for them, the material is being sold domestically."

A European consumer said he had been in the market for December and January and had bought 200 mt of 226 material at Eur1,950/mt. "My suppliers have told me that while demand was good last week, it is softer this week," he said, adding that market players were looking toward business for 2007.
"Suppliers are very nervous about the market for next year--they got burned this year. They have the volumes available [for next year] but it is not being booked," he said, adding that buyers were holding off contracting too much in the view that prices were too high.

A Spanish producer said the market was very quiet and he did not believe prices had moved very much. "Customers are not really looking for extra ingot, while producers are at a good capacity," he said, adding that many customers were trying to postpone their large purchases for as long as possible. "They don't know what's going to happen in the market; they want the opportunity to protect themselves if prices change on the LME," he said, noting that market players looked to the LME aluminium alloy price level for an indication of where 226 prices should be, while they looked to the primary aluminium price for an indication of trend.

A second Spanish producer said he was selling at Eur1,990/mt this week. "There is less production [in Spain] of some competitors because of financial and technical problems," he said, adding that his plant was running at 110% capacity before the December shutdown.