Q2 aluminium demand stable but spot prices high in Europe

Spot aluminum alloy prices crept higher in Europe this week as a number of buyers secured April and second-quarter supplies.

Standard grade 226,the main traded recycled aluminum,rose by Eur10 ($13.03) to Eur1,700/mt and above in Germany, Europe's key market. The Platts assessment for 226 moved up Eur10 this week to

Eur1,700-1,750/mt delivered Germany, including 30 days' credit. "Prices below Eur1,700/mt have disappeared from Germany," said a trade source, who said that demand for secondary aluminum in Q2 looked largely stable.

"We achieved Eur1,700/mt delivered plant for our Q2 supplies," said a European diecaster, who said that this was a Eur10-20 reduction compared with last spot deals for March delivery. The diecaster said that he had left about 30% of his Q2 requirements open for May/June delivery to avoid being "too long in our position."

In Germany, a monthly buyer purchased regular 226 quantities for April delivery at around Eur1,720/mt delivered relatively unchanged from March purchases. While in France, a buying group was seeking some 5,000 mt for Q2, bidding at around Eur1,700/mt, including credit.

Secondary aluminum producers continue to push for higher 226 prices as margins remain squeezed by low ingot sales prices and high scrap input costs, sources said. Spot prices slipped below Eur1,700/mt in late January and struggled to push higher throughout most of February. Delivered spot prices in East Europe were said to be extremely competitive at around Eur1,670-1,680/mt plant, said one southern European producer. "In Central Europe prices are higher at anywhere between Eur1,700-1,740/mt delivered," he said.

"Tight scrap supplies look here to stay...let's see if those selling sub Eur1,700/mt are really able to deliver," said a German producer, who said that he had sold various spot quantities at between Eur1,720-1,750/mt delivered this week.

A trade source said that if ingot prices remained at this low level then "sooner or later people will get real problems... with such prices there are no margins." He said that he had sold some 226 to a smaller diecaster at Eur1,750/mt delivered and 231 grade at Eur1,790/mt.

Demand for alloy in Q2 was expected to remain relatively stable in line with European car production. "Some automakers are seeing a slight reduction in output this year compared with the last few but things are still positive," said an Italian alloy producer.

A trade source said that alloy demand prospects for Q2 were reasonable and that "inquiries were at a good level." While a European diecaster said he forecast stable demand in Q2.

The main difficulty for 226 producers is the continued shortage in scrap supplies because of lower industrial production, especially in southern Europe, and increasing competition for scrap supplies from within and outside the EU.

"Scrap is very tight. It's difficult to get normal quantities at the moment. The winter weather is one factor but also Italian smelters are buying scrap here [Germany] as the Italian industry isn't running at a high level," said a second German alloy maker, who warned that the secondary aluminum industry was not able to "live with such low prices for long" without the threat of insolvencies.