European aluminum alloy spot price steadies as market reaches floor

Secondary aluminum prices stabilized this week in Europe, appearing to reach a floor after slipping for several weeks.

The key grade of recycled aluminum, ingot 226, reached a peak of Eur1,820-1,880/mt delivered plus credit at the start of April and has fallen week by week over the past three months to a low of Eur1,650-1,700/mt delivered at the end of June.

Business is beginning to slow down ahead of the summer turnarounds and holidays, sources said.

Sales to larger consumers this week were heard at around Eur1,650-1,670/mt delivered plus credit, while smaller buyers in some areas were paying over Eur1,700/mt delivered.

A monthly buyer seeking September quantities was understood to be looking to achieve under Eur1,650/mt delivered, but sellers were reluctant to move much below this level.

“We hear buyers seeking low levels of Eur1,640/mt delivered, but at the same time we have succeeded in gaining some orders at above Eur1,700/mt delivered,” said a Polish seller.

An Italian producer agreed that Eur1,650/mt delivered was the limit for them, but they needed Eur1,700/mt delivered and above given current aluminum scrap costs.

Buyers have been pushing for lower prices over the past few weeks, citing good availability. A German diecaster said that although he wasn’t in the market this week he had heard spot offers at around Eur1,650/mt delivered. “I am not sure if this is the bottom of the market, we could possibly see lower in the summer months,” he said.

S&P Global Platts weekly assessment of standard grade 226 ingot remained unchanged at Eur1,650-1,700/mt delivered Germany, plus credit.

Prices for 231 alloy also stayed steady at Eur1,690-1,740/mt delivered Germany, plus credit.

MARGINS SQUEEZED

Ingot sales prices have lost Eur170/mt in 12 weeks.

In contrast, the cost of aluminum scrap has not fallen back as fast, with several secondary producers saying margins are currently very squeezed.

One German producer said they had been unsuccessfully trying to push the price of the main scrap grades lower.

“Scrap prices are very stable, there’s no space for any improvement,” a Polish alloy producer said. Turnings were still priced at around Eur1,150-1,200/mt delivered, she said. “We try to buy old cast at Eur1,250/mt delivered but we are losing out to buyers who will pay Eur1,300/mt,” she said.

An Italian producer agreed that producers’ margins were very squeezed at present as ingot prices have fallen while scrap sellers hold on to prices.

The German producer said it was growing increasingly difficult for foundries to make any profit. “If the market continues this way with high scrap costs versus low ingot sales prices, we could see some insolvencies in the market soon,” he warned.

Rumors surrounding a couple of producers have continued to circulate over recent weeks. While they are entirely unsubstantiated, a German trader said that if there were any bankruptcies then this would cause panic among buyers.

“We would see the price of 226 ingot move up sharply very suddenly,” the trader said, as demand in Europe is very strong.

UK CAR PRODUCTION FALLS IN MAY

The latest figures for UK new car production in May showed a decline, with 136,119 new cars manufactured, down 9.7% year on year, according to figures released Thursday by the Society of Motor Manufacturers and Traders.

May 2016 was a bumper month, though, with output up 26% year on year to the highest May total in more than a decade.

As car manufacturers prepare to ramp up production of new models, exports remain the key driver of demand, with 576,556 new cars shipped abroad since January — a 0.8% increase year on year — although production for overseas markets fell 9.0% in May, SMMT said.

Almost 80% of all cars made in Britain are exported, with more than half going to Europe. Production for the home market fell 12.8% in May, and was down 8.1% for the first five months of the year, with 153,199 cars destined for UK showrooms.

“After a record start to the year, car production in the UK has slowed as production lines gear up for a range of new models,” Mike Hawes, SMMT’s CEO, said in a statement.

“Global demand is strong and exports remain the driving force for British car production volumes in the UK,” he said. “Maintaining our current open trade links with Europe, our biggest market, and further developing global markets is vital for this sector.”