LONDON United Co. Rusal
is attempting to negotiate its aluminum billet supply contracts
with premiums linked to primary metal ingot premiums rather
than the stand-alone European billet premium, sources tell
AMM sister publication Metal Bulletin.
"Rusal is attempting to link
their product premium to the P1020 aluminum premium," a trader
A source at Rusal confirmed that
it was looking to do more European contract business for billet
and other value-added products (VAPs) based on a premium
derived from the standard ingot premium, as is common in other
"Depending on the location, some
contracts are quoted as an up-charge to P1020 material and some
are quoted in outright numbers," the source said. "Were
looking to do more VAP contracts with numbers linked to
The company is attempting to
mitigate the impact of the volatility in aluminum premiums,
which has seen Metal Bulletins duty-paid
European ingot premium rise to $260 to $280 per tonne from $140
to $175 per tonne in early 2012.
In the same period, Metal
Bulletins European billet premium has risen to $400
to $430 per tonne from $370 to $400, meaning that the spread
has narrowed between the two.
Rusal wants to link its billet
contracts to the P1020 premium not only to benefit from the
current high numbers but to protect against similar volatility
in the spread next year and beyond.
"In most regions, we have the
possibility of producing either P1020 or VAPs, depending on
whats more interesting," the source said. "Our goal is to
produce more VAPs, but we dont want to be in and out of
the VAP market. We dont want to leave it next year
because the premiums dont work."
Many companies that buy aluminum
ingot and remelt it into various products have suffered
enormously this year, as the cost of their raw material has
risen much faster than the price of their products. Many have
closed their doors, leaving a gap in the market.
Moscow-based Rusal is spending
more than 170 million rubles ($5.4 million) to upgrade the
casting facilities at its Novokuznetsk aluminum smelter, which
will increase the facilitys output of VAP. It is also
modernizing its Aluminium Division West smelters in Russia,
boosting the share of VAP to 100 percent of production at both
the Volkhov and Urals smelters.
"When an opportunity presents
itself, we are happy to take it," the Rusal source said.