Extruders have excess aluminum billet: sellers

Aluminum billet consumers have started the new year with excess material on the floor after they purchased extra billet in 2012 in case labor contract talks at Alcoa Inc.'s Aluminerie de Becancour (ABI) smelter in Quebec turned sour.

Few 2013 spot deals have closed as a result, keeping premiums between 11 and 13 cents per pound.

"We ordered more than we would have otherwise in anticipation (of a strike or lockout at ABI). We usually try to get (inventory) down at the end of the year, but we stocked up for December, January and February," an extruder source told AMM. He estimated that he has between 20 and 40 percent more material than normal.

Another producer source said his customers purchased a couple of weeks’ worth of excess material at premiums between 12 and 13 cents per pound.

Alcoa and the United Steelworkers union have been attempting to negotiate a new contract covering some 900 employees at the 400,000-tonne-per-year ABI smelter since Sept. 11. Discussions between the two parties are ongoing.

A strike or lockout would make billet supply, which has been tight, even more scarce, and potentially send spot premiums soaring.

Despite a slow start to 2013, one producer completed a spot deal at a premium of 12.9 cents per pound, and has already received inquiries for forward purchases. "I’m starting to be a bit more positive. General markets are better," he said. "We’re expecting (extrusion demand) in the 6- to 8-percent range."

A fourth producer source said that it will take a while for consumers to work through inventory, but he anticipates that some end markets - heating, ventilation and air-conditioning (HVAC) components, residential construction and automotive - will all take off in a few months. "As we get closer to springtime, you’re going to see manufacturing pick up again and lots of buying. It will be a snowball effect," he said.

Reactions to the fiscal cliff resolution were mixed.

"Keeping the tax policy fairly similar to where it was is good, but it’s a small part of what needs to be done. I don’t think what was passed is a sustainable solution," the extruder source said.

The fourth producer source said he believes that once consumers realize "the sky isn’t falling" and continue to receive orders, confidence will return and it will be business as usual.