NEW YORK Aluminum billet
consumers have started the new year with excess material on the
floor after they purchased extra billet in 2012 in case labor
contract talks at Alcoa Inc.s Aluminerie de Becancour
(ABI) smelter in Quebec turned sour.
Few 2013 spot deals have closed
as a result, keeping premiums between 11 and 13 cents per
"We ordered more than we would
have otherwise in anticipation (of a strike or lockout at ABI).
We usually try to get (inventory) down at the end of the year,
but we stocked up for December, January and February," an
extruder source told AMM. He estimated that he has
between 20 and 40 percent more material than normal.
"We havent had any spot
business yet. Everyone went long on billet due to worries about
ABI and Ive seen some depletion in December due to
destocking. There is definitely excess inventory right now," a
producer source said. "Theres a January hangover."
Another producer source said his
customers purchased a couple of weeks worth of excess
material at premiums between 12 and 13 cents per pound.
Alcoa and the United
Steelworkers union have been attempting to negotiate a new
contract covering some 900 employees at the
400,000-tonne-per-year ABI smelter since Sept. 11. Discussions
between the two parties are ongoing.
A strike or lockout would make
billet supply, which has been tight, even more scarce, and
potentially send spot premiums soaring.
Despite a slow start to 2013,
one producer completed a spot deal at a premium of 12.9 cents
per pound, and has already received inquiries for forward
purchases. "Im starting to be a bit more positive.
General markets are better," he said. "Were expecting
(extrusion demand) in the 6- to 8-percent range."
"One customer asked us (for
spot) but I told him no. We dont have any," a third
producer source said.
A fourth producer source said
that it will take a while for consumers to work through
inventory, but he anticipates that some end
marketsheating, ventilation and air-conditioning (HVAC)
components, residential construction and automotivewill
all take off in a few months. "As we get closer to springtime,
youre going to see manufacturing pick up again and lots
of buying. It will be a snowball effect," he said.
Reactions to the fiscal cliff
resolution were mixed.
"Keeping the tax policy fairly
similar to where it was is good, but its a small part of
what needs to be done. I dont think what was passed is a
sustainable solution," the extruder source said.
The fourth producer source said
he believes that once consumers realize "the sky isnt
falling" and continue to receive orders, confidence will return
and it will be business as usual.
"At some point, we have to start
running our business instead of wondering whether the
politicians will make sense of anything," the first producer
source said. "Demand is decent. Yes theres a bit of a
lag, but thats typical. Were going to see a
definite pickup in the spring."