European aluminium duty cut proposal won't take effect from Jan 1

It is impossible for the European Commission's proposal for a two-phase cut to the European Union's 6% unwrought aluminium import duty to be passed this year, the EC told Platts late Monday. This means that the proposed legislation will not take effect from January 1, as the EC had initially anticipated.

An EC spokesman said Monday that the proposal was still being finalized at commission level and it would be "impossible" for it to go before the Member States committee before the end of this year. He suggested that since it would not take effect from January 1, importers would be able to claim retroactively once the legislation was in place--provided, the member states voted in favor of the cut.

"We hope to have the proposal finalized tomorrow, but there is no way it can be passed before the end of the year," he said.

The proposal the EC is working on involves an initial cut to 3% from 6% in January and a subsequent reduction to zero in 2009. And, while it was believed that most of the eastern European countries were pushing for the duty cut, others like Germany, France, Spain and the Netherlands might be opposed to the cut. "Some of those opposed have primary smelters on their territory and it suits them the way it is," an aluminium trade source said late last week.

The EC's statements about the duty cut have wreaked havoc in the European physical market, bringing contract talks to a standstill--at a time when market participants would ordinarily be looking to wrap up their deals for the following year. Premiums for duty-paid Good Western material were heard at extraordinarily highs levels of $190-220/mt plus LME cash on an in-warehouse Rotterdam basis over the past few weeks, before being pressured lower to a broad $150-200/mt range this week.