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Aluminum billet upcharge falls to 5.5-year low

Jul 22, 2016 | 12:55 PM | Kirk Maltais

Tags  Billet upcharge, aluminum billet, billet premium, 6063 extrusion billet, Kirk Maltais


NEW YORK — The aluminum billet premium has fallen to a more than five-and-a-half-year low, with market participants noting that while activity remains light for spot 6063 extrusion billet competition from imported billet is weighing on the market.

“Billet really isn’t that fluid but the pressure continues for lower upcharges. ... “(We're seeing the) typical summer slowdown, but we anticipate August to pick back up,” one buyer source told AMM.

“There’s definitely still pressure on (the premium),” a second buyer said, noting that imported metal is currently “everywhere.”

Imports of unwrought aluminum—not including from Canada—totaled 144,546 tonnes in May, up 33.8 percent from 108,033 tonnes in May 2015 (amm.com, July 8).

However, business for extrusions has picked up, which will likely serve to spark spot billet business through August and into September, the second buyer said.

“We’re at a point where we might look at doing some spot (business),” a third buyer said, noting that he has been covered inventory-wise for months. “(I’m) still not 100-percent sure I’m going to do it, I’m going to make sure I fill my contracts before I do anything else.”

AMM’s latest assessment of the spot 6063 extrusion billet upcharge fell to 10 to 11 cents per pound, down from 10.5 to 11 cents per pound previously (amm.com, July 8). This is the lowest level plumbed by the upcharge since it fell to  9.75 to 10.5 cents per pound from Dec. 16, 2010, through Jan. 13, 2011, when billet suppliers were providing “blue light” discounts for buyers (amm.com, Dec. 16, 2010).

Suppliers are currently constrained by the low billet upcharge, given the strong upper hand buyers hold on the market.

“Spot business, there’s very little there,” one supplier said. “(There’s) no pricing power ... it’s tough.”

The supplier noted, however, that August business is showing signs of improvement, indicating that the summer doldrums may be coming to a close.

Market participants told AMM earlier this month that while the premium was fitfully weakening, seasonality had brought spot transactions to a virtual standstill (amm.com, July 8).

Kirk Maltais
kirk.maltais@amm.com



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