NEW YORK Mating season has kicked off for magnesium producers and consumers looking to lock up next years supply.
"This is the time we all live for," one supplier told AMM. "Weve had a lot of big people come out. They want to get things done and wrapped up."
One consumer source said his company has already secured most of the material it requires for 2013. "Weve done most of our business for next year," he said.
However, not all of 2013 material has been contracted, according to one trader. "Were talking to a couple of intermediate players in the aluminum market, but (mating season) really has just commenced," he said.
Contract prices vary, although the consumer said hes seen a slight dip so far.
"Contracts this year were mostly between $2 and $2.10 (per pound). For next year, theyre between $1.95 to $2.05," he said. "From what Ive seen, theres a little bit of softening."
As discussions move forward for 2013 material, spot activity has virtually stopped, leaving AMMs prices firmly between $2.05 and $2.25 per pound.
Sluggish spot markets were a trend this year, sources agreed.
"(Spot) markets have been very, very quiet this year. Exceedingly quiet. In part, thats because (more) consumers tied up their volumes in contracts this year. ... In the past, you see some regular (spot) business to get a sense of where the price is. But it hasnt moved one iota," the trader said.
"We quoted one spot deal quite a bit higher, but didnt win it. To me that says (spot) prices arent going up as much as we anticipated," the supplier agreed.
An increase in multiyear contracts signed in 2011 also contributed to the lethargic spot market in 2012, sources said.
Participants predict that the spot market will remain dormant for the first half of 2013, but could experience an uptick as these multiyear contracts expire at year-end.
"You may see (those consumers) back in the spot market sometime next year, but my guess is its likely going to happen in the second half, at the earliest," the trader said.
While uncertainty remains, magnesium stands to benefit from the U.S. automotive industrys continuing shift toward lightweight material to meet stricter fuel emissions standards.
General Motors Co. is testing a thermal-forming process and proprietary corrosion-resistance treatment for magnesium sheet that would allow it to replace some steel and aluminum in its vehicles (amm.com, Oct. 24).
According to the Detroit-based automaker, magnesium weighs 33 percent less than aluminum, 60 percent less than titanium and 75 percent less than steel, making it an ideal material of choice for automakers aiming to meet Corporate Average Fuel Economy (Cafe) regulations of 54.5 miles per gallon by 2025.
"We couldnt be more thrilled that GM is spending money to actually make things happen in lightweight metals," the supplier said.