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Aluminum billet premiums ease slightly

Keywords: Tags  aluminum billet, billet premium, building and construction, automotive, LME, Michael Cowden

CHICAGO — The aluminum billet market has softened in recent weeks as uncertainty over the economy weighs slightly on premiums.

AMM’s aluminum billet premium range widened to 11.75 to 13 cents per pound last week from 12 to 13 cents previously.

"It’s a little bit of a mixed bag," one consumer source said. "Some people are reporting fairly bullish numbers and premiums still on the high side, yet we see a lot of billet being offered at the moment, suggesting the dew is off the lily."

He said his company had seen a lot of unsolicited billet offers recently and could obtain it at premiums under 12 cents. "I’m not sure why some people think the market is poised to continue to strengthen. It’s just not that strong," he said.

Some sources said that billet demand and premiums had been bolstered by improved activity in the building and construction sector, increased aluminum penetration into the automotive market and low aluminum prices on the London Metal Exchange, which make consumers less sensitive to premiums.

"I don’t know one buyer who would give an extra penny on billet premium just because the LME is lower," the consumer source said. And building and construction activity, while moving in the right direction, is not yet strong enough to have a significant impact on billet prices or premiums, he added. Similarly, while the automotive market may be on firm footing, there is not yet enough new demand for aluminum from the sector to significantly bolster billet demand.

The consumer source said his company might even be willing to resell billet into the market if it saw premiums as high 13 to 14 cents.

A producer source conceded that the market is softer than expected. "It’s far from doomsday. But normally at this period, summer starts to kick in and everyone is a little busier. It’s just not happening right now," he said.

A long winter may have delayed some construction projects and could explain the current slow market, the producer source said. "I’m hoping that the remaining half of the year—because we are already asking customers to declare what they are going to take for June—is going to be OK."

He said his company had some open capacity that it was looking to place with existing customers, but it also was considering selling on the spot market, where it would be happy with a premium of 12 cents.

Other sources agreed with the assessment that the current lull might be weather-related and cautioned against reading too much into what might be only a short-term blip in activity and demand.

"The markets are OK. There are some strong spots and some weaker spots. There is metal available but not in abundance—and people aren’t going to let it go unless they get their number," a second producer source said.

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