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Aluminum billet demand inches higher

Keywords: Tags  billet, billet premium, extrusion, building, construction, transportation, recreational vehicles, RVs aluminum


CHICAGO — Demand for aluminum billet has improved modestly in the run-up to spring, according to market sources.

Some players in the North American billet market said the increased activity appears to be the result of customers looking to lock-in material at low prices on the London Metal Exchange, where cash aluminum prices have held below the symbolic $2,000-per-tonne mark for four days now.

Others chalked up brisker business to improving demand across a number of major end-use segments, from building and construction to the recreational vehicle (RV) sector.

"The curtainwall guys are going nuts right now," one billet producer said. Curtainwall, often made from aluminum, is used to frame glass on the outside of buildings. While the building and construction industry overall might be far from robust, certain sectors of it are "coming out of the basement," the producer said.

U.S. construction spending in January came in at $883.3 billion at a seasonally adjusted annual rate, off 2.1 percent from revised December 2012 estimates but up 7.1 percent from January 2012 levels, according to U.S. government data.

The aluminum billet producer said orders are also good from the transportation sector, especially for truck trailers, rail cars and RVs. Improvement in all three sectors is largely a result of aging vehicles being replaced, he said.

A consumer agreed that business was improving. "We’re ahead of last year. But we could stand to take a little more than we’re getting right now," he said.

The marine and RV sectors have been solid, especially in North America, he said. But he questioned whether producers are booked as solidly as they might be telling their customers, pointing to weaker-than-expected demand in China, continued stagnation in Europe and additional aluminum production capacity coming online in the Middle East.

If producers weren’t talking up the market toward the end of the year during contract talks, they were at least overly optimistic in their projections for 2013, the consumer contended. "Our suppliers in this area aren’t overly busy," he said.

Meanwhile, some said low prices on the LME might also be boosting billet demand. On March 1, cash aluminum settled at $1914.50 per tonne, down 5.4 percent week over week. At those prices, some would-be buyers may be coming in off the sidelines, sources said.

The first producer, however, said his company had been largely unaffected by steep price drops on the LME, except when it comes to procuring scrap. Because his firm links its scrap purchases to LME prices, scrap suppliers have been "reluctant to sell" until LME prices improve, he said.

Many market players agreed demand was on the rise, but the modest uptick has not been enough to increase premiums, with AMM’s billet premium holding steady at 12 to 13 cents per pound this past week.

Some market sources had previously speculated that billet premiums might ease as a result of workers at Alcoa Inc.’s majority-owned Aluminerie de Bécancour Inc. (ABI) smelter agreeing to a new labor contract (amm.com, Feb. 22). But others countered that the facility was still producing off-grade material with higher iron content and might not be up and running at full speed for several more weeks, lending the premiums some continued support.

If that continues, billet supplies could be constrained, a second producer source agreed. "You can avoid them for a couple of weeks, but after that, you are going to need them," he said of the 400,000-tonne-per-year Quebec smelter.

But others wrote off such talk. ABI has been a "complete non-factor," a third producer said, arguing that anyone who had anticipated a production disruption already built modest inventories to compensate for the possibility.

A fourth producer suggested he was almost disappointed by the a deal being reached at ABI. "I was hoping for a strike and an uptick (in billet premiums). But now I’m afraid I might get the opposite, a ‘downtick,’" he said.


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