NEW YORK North American aluminum billet producers and consumers are awaiting the outcome of labor contract discussions between Alcoa Inc. and the United Steelworkers union at the Pittsburgh producers Aluminerie de Bécancour (ABI) smelter.
Alcoa and the union had yet to reach an agreement Wednesday despite the passing of an extended deadline of Nov. 27.
If an agreement is not reached and some 900 workers at the 400,000-tonne-per-year smelter go on strike or are locked out for a prolonged period, North American billet supply will be affected, according to producers and traders.
Producers say markets will feel the pinch almost immediately if potlines are shut down. Even a weeklong strike could cause a backlog of shipments for several weeks, one producer told AMM.
Consumers argue that production would have to be shut for a number of months before it would have any significant effect, as most took precautions in anticipation of a shutdown at ABI and have extra inventory on their floors.
"We have a reasonable amount of inventory. We were looking at (ABI), so we went a little above what we would normally have this time of year in case of a slowdown or shutdown," one consumer said. "It would have to go on for at least a few weeks before wed notice it."
"I suspect that (like us) other billet customers have contingency plans in place to deal with a potential work stoppage," a second consumer agreed. "It will not be an issue unless it goes beyond three months or more. There (is) plenty of imported billet stocked up at the ports in preparation."
"If they dont make billet for a week, its probably not a huge deal," a trader said. It wouldnt take long before the impact is felt, though, he said.
But a second producer source said his company is waiting to hear what the outcome is in Quebec before closing spot business for December.
"I keep receiving calls from traders looking for some (spot) and I keep saying, Not yet," the second producer said. If ABI is taken out of the equation, the producers excess capacity "will vanish."
The talks have also impacted next years contracts: Alcoa put a clause in its 2013 ABI contracts that says if an agreement is not reached between the union and the producer, the contracts are null and void (amm.com, Oct. 19).
Spot billet premiums continued to trade at between 11 and 13 cents per pound Wednesday, but sources expect a rise next year, especially if ABIs production is halted.
"If they strike, we would raise our offer to 16 or 17 cents," the trader said.
Consumers say they continue to look for other areas to source billet if a strike is prolonged.
"We have a backup plan of where well get billet. Well just have to see where were at in the pecking order," the first consumer said.