Currency rates and LME figures stifle UK secondary aluminium price

UK secondary aluminium prices stayed flat on Wednesday September 4, with unfavourable currency rates and low London Metal Exchange (LME) prices preventing any increases for both ingot and aluminium scrap. LM24 pressure diecasting ingot continued to trade at £1,520-1,570 ($2,364-2,442) per tonne, while LM6/LM25 gravity diecasting ingot stayed at £1,720-1,780 per tonne.

Demand remains strong, with producers unable to meet all the enquiries they receive.

“We have a lot of contract business, and with the huge amount of enquiries we’ve had we’ve not been able to quote for a lot of people,” a producer said. “Many people are coming in for the fourth quarter, and we’re putting prices out there.”

But prices have not moved despite the high demand, which sources put down to several factors.

First there are low prices in Europe, where a tender by German carmaker Volkswagen found prices well below market ranges, at just over €1,700 ($2,240) per tonne. Metal Bulletin’s European DIN226 pressure diecasting ingot price stands at €1,800-1,860 per tonne.

Sellers said they will wait for companies that are desperate to sell to clear their stocks before trying deals into Europe at higher prices.

“It will wash that capacity out and, once that has gone, will relieve any downward pressure on prices,” a second producer said.

The second factor keeping secondary prices from increasing is the low LME aluminium prices. LM24 ingot is trading about $600 per tonne higher than primary aluminium on the LME.

“The real problem is the LME price, and the convergence of primary and secondary aluminium prices,” a scrap dealer said. “Usually the difference is about $150 per tonne. Today’s levels might make sense for some different alloys, but they are absurd for LM24.”

And the last factor is currency rates. With much of the spot demand coming from Europe, the strength of the euro is having a big influence on the UK market.

The euro was trading at about 1.185 to the UK pound on Wednesday, from about 1.159 a week ago.

Currency rates have also kept scrap prices stable, with weakness in key export markets.

“India is a big export market for scrap, and the rupee is getting hammered,” a second scrap dealer said.

Were LME prices and currency rates more favourable for secondary aluminium and aluminium scrap sellers, prices would probably be significantly higher.

“If the LME were $200 higher, we would be seeing price increases,” a third ingot producer said. “But we won’t see much more on ingot [under these conditions], and there is no downside.”