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European aluminum billet contract volumes improve

Keywords: Tags  aluminium billet, aluminium ingot, premiums, jethro wookey

LONDON — Aluminum billet contract volumes for the first quarter of next year improved last week, with producers reporting larger-tonnage deals than in previous weeks to customers that had earlier rejected similar offers as too high.

"Some customers came to us a few weeks ago and said our numbers were too high, but they’ve shopped around and realized the premiums are the same elsewhere," a producer source said.

A good number of deals were signed in November for the first quarter, he said, but those deals were for only a few hundred tonnes each. Last week, however, the producer signed contracts for several thousand tonnes over the first quarter at premiums ranging from $485 to $500 per tonne on a delivered basis.

Smaller-tonnage deals have been reported at premiums as high as $535 per tonne on a delivered basis so far this month. Delivery costs range between $20 and $30 per tonne over in-warehouse premiums, according to the producer source.

AMM sister publication Metal Bulletin’s in-warehouse European billet premium stands at $450 to $490 per tonne, up from $420 to $450 at the beginning of October.

"The big customers talk to everybody. If these guys are accepting the high premiums then the market is at this level," the producer source said. "Some are ordering now that said they were out of the market (at Metal Bulletin’s International Aluminium Conference) in Düsseldorf or at LME Week."

He expects more high-volume billet deals to be signed this week. "Once you get done with a few big customers, you can go to others," he said. "We closed three big deals last week and we will close more this week."

On the ingot side, however, business remains very slow for both spot tonnages and first-quarter deliveries.

"There’s nothing before the end of the year, and no one is approaching us for the first quarter," a second producer source said.

Premiums are not falling, though, with the daily duty-unpaid premium at about $214 per tonne and duty-paid material in a range of $275 to $295 per tonne.

"The premium level is not what’s keeping the customers from booking—it’s that they are uncertain over their own requirements," the second source said.

Those customers that have booked supply contracts have mostly done so with traders, who are able to offer more flexible terms than producers.

"We have contracts with multiple formulas in them—some fixed premiums and some floating premiums—and different tonnages every month," one trader said, adding that he expects ingot premiums to go higher in the first quarter. "There’s not much room on the downside as there’s so little duty-paid material out there. So the market becomes the unpaid market, and people are replacing material with metal from Asia or Canada. If you do that, you have to pay high numbers." 

A version of this article was first published by AMM sister publication Metal Bulletin.

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