European spot offers of aluminum alloy push higher on further insolvency rumors

Spot offers of aluminum alloy in Europe have pushed higher this week as rumors of additional insolvencies continued to circulate in the market.

Prices for commodity grade standard 226 aluminum alloy have risen by around Eur80-100/mt ($105-131/mt) in Germany, Europe's key market, since news that a major German alloy producer, Oetinger, had financial difficulties and filed for insolvency June 27.

Platts assessment of standard 226 increased this week to Eur1,800-1,850/mt delivered Germany, including 30 days' credit, up Eur30 from Eur1,770-1,820/mt the previous week. Similarly, spot indications for grade 231 also rose to Eur1,830-1,890/mt delivered Germany, up Eur50.

Rumors that other producers located in France, Spain, Italy and East Europe were also on the brink of insolvency have spooked the market. Some small producers in southern Europe are understood to have difficulties sourcing scrap because insurers have cut credit lines. A trading arm of one producer located in East Europe was also rumored to be closing down and the 50,000 mt plant was up for sale but official confirmation was not available.

Although the majority of buyers are comfortable for July and August, sellers say they have received a number of inquiries for further forward deliveries in September and October.

A German producer agreed that spot demand had slowed this week but that buyers were checking prices for September-October. He said that prices were in the Eur1,800-1,850/mt range but he predicted spot numbers would increase to around Eur1,850/mt in September.

Q4 buyers were likely to be in for a shock, sources said. "When the big quarterly buyers come back into the market we are sure prices will be much higher...although scrap is more available it is still expensive and we need to cover the losses from the first half," said an East European producer.

A key German diecaster agreed that spot prices in general had moved towards Eur1,800/mt but he had also received a trade offer of Polish 226 at Eur1,750/mt. "I'm not sure what quantities this trader has to deliver but it's certainly a good price," he said.

Buyers with Oetinger contracts are in a difficult situation regarding securing forward tons. "I've fixed my September volumes just in case Oetinger won't be able to deliver after September 1 but if they do deliver I may have too much product," said a European diecaster.

A trade source said that the spot market was fairly slow this week but with various rumors of insolvencies flying around the market buyers were getting nervous about sourcing supplies. "The UK is fully booked and some customers are in the market for material right now...sellers there are offering as high as Eur1,800/mt ex-works."