The European aluminium market might counter a downcast at the start of 2023

The entire European aluminium market is currently streaming through a disquiet following a moreover better H1 2022.  During the first quarter of 2023, the manufacturing industry is expected to counter a very gloomy prospect. While delivering their ambitious purchasing strategies earlier in 2022, many customers have overbooked themselves and will be seeking to delay deliveries in 2023.

Although spot energy prices have fallen back in the past month, they remain far above the levels being paid by manufacturers under previous term contracts, many of which will expire in the new year according to market analysts. Manufacturers will face huge price jumps for their power needs, even if spot prices fall further in the near term or if EU governments impose energy price caps.

In Q1 2023, few in the European aluminium market expect any concerted trading activity, either on contract sales or on the spot market, and supply availability may change dramatically when buyers return later next year.

According to an industry expert, "Europe is particularly worried about a drastic fall in manufacturing activity. Most businesses have not yet felt the impact of huge power price increases, but they will in the first and second quarters, and there are no fixed power contracts anymore."

The industry expert pinpointed the supply problems in France, “Though power costs are falling, they are still the most significant issue, where half of the nuclear capacity is online. Gas supplies have been cut, and the energy regulator recently called on residents and industries to reduce power consumption to avoid winter blackouts. It is difficult to predict many things, but energy prices will remain high.”

Against high costs, demand has suffered. After a relatively strong first half of the year helped maintain high premiums, things changed markedly in the third quarter.

Many manufacturers were unprepared when aluminium orders fell back in Q3 after they had booked heavily against future price increases. End-user demands are declining, and consumer stocks are high, resulting in double-hit demand levels nearby. For now, many buyers are stressing about delaying deliveries of metal scheduled for Q4 2023.

However, according to another industry expert, "Many companies are experiencing a high cost of doing business, as well as falling margins. Across the market, consumers are delaying and postponing deliveries in Europe, Asia, and the US, unfurling everywhere. There will be almost no activity in the first quarter."