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European aluminum billet demand surprises producers

Keywords: Tags  aluminum, billet, premiums, jethro wookey

LONDON — European aluminum billet premiums have strengthened slightly after producers were surprised by decent spot demand, although markets further upstream have suffered from very low spot market activity so far in 2013.

AMM sister publication Metal Bulletin’s spot premium range narrowed to $480 to $490 per tonne from $470 to $490 previously, and producers are already offering at above $500 per tonne as consumers come to market for short-term deliveries.

"There are some spot opportunities, with people getting orders and then having to come to us for metal," a producer source said. "Some are accepting the new levels, while others are saying there are lower offers. But we’re doing okay because we’re not chasing orders."

A second producer source reported decent sales into Europe after sales had dried up at the end of last year. "On the billet side, we’ve been surprised by good demand from central and eastern Europe," he said. "Demand is up since the end of last year but visibility going forward is pretty low, so it has been a nice surprise."

Good billet demand on the spot market has contrasted with very low spot demand for products further upstream, with both primary aluminum and alumina sellers reporting very low spot sales so far this year after good volumes were booked on quarterly contracts for the first three months of the year.

But total billet volumes on both spot and contract sales remain below historical averages after falling last year.

"The existing demand is putting upward pressure on premiums, but we’re still below 2011 levels," the first producer source said. "We forecast that the first half of the year will continue at these levels, and then pick up in the third quarter to beat 2012 volumes."

But premiums could rise further, even with limited demand, after supply fell in 2012 due to production cuts.

The first producer source said that premiums offered into Italy are above those being offered further north, as supply in that region has been hit by the full closure of Alcoa Inc.’s Portovesme smelter in November (, Nov. 7). "Italy is skimming the market on the high side," the first producer source said, reporting premium offers into Italy of about $510 per tonne.

Although the lost Portovesme volumes may be made up by Alcoa’s Saudi Arabia-based joint-venture Ma’aden smelter—which produced its first hot metal in December and will eventually produce about 135,000 tonnes of billet per year—that material may not find its way to Europe (, Dec. 12).

"We’ve not yet decided where it will go," an Alcoa source said. "Every month we are checking the arbitrage between different regions."

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

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