Aluminum billet market upbeat on 2013

Aluminum billet producers and consumers are fairly upbeat heading into year-end as most of their 2013 contract business is booked and demand is expected to remain reasonably robust next year on the back of strong automotive markets and a recovering building and construction sector.

Tight supply has meant producers have successfully raised contract premiums for next year by 2 and 3.25 cents per pound (amm.com, Sept. 27), with producers and consumers confirming to AMM that they had locked in business at 12 cents per pound for next year.

"A couple guys whined (about the increase) but after shopping around, they came back a few days later with a signed contract and said,’We’re looking forward to doing business with you next year, " according to one producer, who is now fully booked for 2013. "They didn’t have a whole lot of choice."

The tightness in supply is unlikely to change next year, according to producers who confirmed that spot billet premiums continue to trade between 12 and 13 cents per pound.

However, some participants expressed concern about President Obama’s re-election Tuesday, with worries ranging from economic growth being slower than expected to health-care reform.

"I don’t think (the economy is) going to crash. ... The world is not going to come to an end. But I don’t see any great news coming in the next couple of years as far as business (is concerned)," one producer said.

"I don’t think the last four years were what they could have been, and the next four (will be similar)," a second producer added.

Obama’s re-election means companies will take a "wait-and-see" approach before making major investments, a third producer said.

"I can tell you that after Tuesday, the results aren’t going to help (investments)," the second producer added.

Producers also fear that Obama’s health-care reform will be costly, sources said.

"We need to take a closer look at how the whole health-care reform will be handled and what options are available to companies that cover their employees," one consumer said.

Still, participants acknowledged that even if business remains stagnant, a number of key end markets for aluminum-like automotive, solar and wind-stand to benefit from Obama being in office.

"Even if business remains the same, that’s pretty good for me," the first producer said.

"Industrywide, I think things have been relatively strong this year and I want to say it will be more of the same next year ... it;s still a slow-growth scenario overall, though," the consumer said.