NEW YORK Aluminum billet
producers plan to sell less material on contract than usual in
2013, sources told AMM Thursday.
A domestic producer, which held
its seventh 2013 contract discussion last week, plans to cut
back the amount of metal it sells on contract next year by more
than a third to take better advantage of the spot market. "In
2012, we contracted 99 percent of our capacity. Were only
going to book 65 percent of our 2013 metal on contract," a
company source said. "We want to take advantage of the spot
market in 2013, which we couldnt do in 2012."
A second producer source agreed.
"(Its) still up in the air so far (but) I think
were going to lean more on the side of taking a little
less commitments compared to this year," he said.
Last week, the first producer
sold two spot truckloads at a premium of 13.75 cents per pound
and one truckload at 14 cents per pound for delivery in August,
maintaining that supply tightness will mean both spot and
contract premiums will be at high levels next year. "Generally
speaking, if you think markets will be tight you take less
commitments and try to surf a little more on the spot market,"
A trader agreed that contract
premiums next year will be higher than this year, primarily
because producers have been losing money as the price of
aluminum on the London Metal Exchange continues to slide.
Three-month aluminum ended Thursday at $1,898 per tonne on the
LME, down 19.2 percent from a 2012 high of $2,349 per tonne in
"Look, producers are desperate.
Theyre getting hurt by the LME," the trader said,
anticipating that 2013 contracts will be at premiums at least
between 12 and 13 cents per pound. "Producers may draw the line
in the sand and say 14, 15 cents otherwise were not
Solid demand from the
automotive, distribution and truck and trailer markets coupled
with curtailmentsNorsk Hydro ASA is shutting its
180,000-tonne-per-year smelter in Kurri Kurri, New South Wales,
amm.com, June 6)have contributed to the
supply tightness this year.
Few aluminum billet spot deals
were closed this week, but premiums held at record high levels
between 12.5 and 13.5 cents per pound.
"I think its still very
solid," the second producer source said. "Its not as red
hot as it was, and of course theres some slowdown in the
summer, which is typical. But we had more orders in September
than we anticipated."
"Im still doing spot at
high levels but theres no panic buying anymore," the
A consumer agreed that demand
remains robust. "Im still waiting for the business
softness that you hear and read about but I havent seen
it in our orders yet. Were still busy," he said. "Looking
for spot metal now, youre going to pay (premiums) around
12.5 cents. It might even be closer to 13."
However, another consumer said
there is already slower growth in truck and trailer markets and
other sectors may follow suit. "The weakness is
broadconsumer goods, industrial/distribution,
residential, and lets not forget the still-dead
commercial building and construction market," he said.