Europe secondary 226 aluminium alloy prices slip on more availability

Secondary 226 aluminium alloy prices slipped back this week as market sources reported a slight increase in spot availability.

"Many buyers booked their first-quarter volumes early before they knew exact demand levels but I've heard that some didn't need all of the material," said one European buyer, who added that this had put a little pressure on spot market prices.

Furthermore, sources said an influx of alloy from Russia and Ukraine diverted from Asia pressured 226 prices lower in Europe. "The Japanese auto industry is almost back up and running again so I guess this extra tonnage will disappear from the European market," said a trade source.

A European trader confirmed that prices had dipped in Europe and that he had heard rumors of a 150 mt deal at as low as Eur1,930/mt delivered German works. "Many producers are trying to sell their capacity," said the trader.

"Prices have pulled back in the last week or so," said a consumer, who reported recent purchases done at Eur1,950-1,970/mt delivered.

The bulk of second-quarter contracts were concluded in early March at Eur1,970-1,980/mt delivered, down from first-quarter contracts of between Eur1,990-2,000/mt, said a diecaster. "And if you booked second-quarter today prices would be some Eur20-30/mt lower," he said, adding that he expected prices to pull back during the second half to around the Eur1,900/mt level.

The Spanish market, although much recovered from summer 2010, was still seeing lower prices than in north Europe. Alloy 226 prices in Spain slipped further this week to Eur1,920-1,950/mt, from Eur1,930-1,960/mt two weeks earlier.

The bulk of spot activity in Europe this week was reported at around Eur1,960-1,980/mt delivered Germany. The Platts price for prompt aluminium alloy 226, delivered from German works with 30-day payment terms, was set at Eur1,950-2,000/mt Thursday, down from Eur1,950-2,020/mt on March 10.

Meanwhile, on the London Metal Exchange the official cash settlement price for aluminium alloy was set at $2,395/mt Wednesday, $14 above $2,381/mt on March 10, and $34 higher than $2,361/mt on March 2. FIRM Q1 DEMAND, Q2 OUTLOOK PROMISING, SCRAP TO EASE First-quarter demand in Europe was fairly healthy compared with the last quarter of 2010, said one consumer. "We saw quite good demand in the market during Q1 and the outlook for Q2 is good too," said a diecaster.

So far, Japanese alloy consumers have honored their contracts in the aftermath of the devastation caused by the recent earthquake and tsunami there. "That's why the market is so stable. There have been no renegotiations yet," said one European alloy producer. But the disaster in Japan may end up influencing the European market in the short term, said one market source. "The Japanese automotive industry buys a lot of aluminium products and parts from China and as demand for these products slows in the short term, then Chinese scrap purchasing will slow too," he said, adding that this should increase scrap availability in Europe in the short term, which could see secondary prices ease back.

A producer concluded that everyone was watching the situation in Japan and for the moment it was "business as usual."