participants remain divided on whether the aluminum billet
market is seeing an uptick in demand after a slow first
quarter, with some contending that building and construction
activity is picking up and others reporting little change in
order entry rates.
The billet market remained slow
through April, most market players agreed, but some said this
past week that May is looking much better than the previous
month and that June is shaping up to be even stronger.
"Its looking a little
better. Its not great, but weve got enough to keep
our plants busy," a billet producer said. "We hadnt seen
the seasonality kick in. So maybe thats what were
starting to see."
The producers company made
some recent spot deals with a billet premium of 12 to 13 cents
per pound, he said, but acknowledged that the orders with
higher premiums were for smaller volumes.
A second producer said that the
scrap market has loosened up with warmer weather and that his
company has been "pleasantly surprised" by June commitments
from customers in the building and construction sector. Yet
despite the reported uptick, he characterized the market as
only "holding its own" in general and pegged premiums in the
range of 11.5 to 12.5 cents per pound.
As a result of the reported
sales, AMMs aluminum billet premium range
widened to 11.5 to 13 cents per pound from 11.75 to 13 cents
per pound previously.
A third billet producer said he
had still seen no seasonal boost in orders. "Its still
slow," he said, noting that his most recent deal was for
500,000 pounds at a premium of 11.75 cents.
Still, an aluminum trader said
that optimistic sentiment among some of his customers was
"slowly coming to fruition."
Several customers who he
described as "precursors" to building and construction are
seeing business picking up, he said. "At some stage that is
going to translate into more demand for extrusions," the trader
said, noting that contracts for June came in stronger than
anticipated. "Was it that winter held on and everything is a
month late? I dont know. But there does seem to be a bit
of confidence out there."
The trader pegged premiums at 12
cents per pound, which he said most extruders recognized as a
fair priceone that represented neither gouging nor
discounting. He questioned the motives of market players who
might be selling below 12 cents, suggesting they might be under
pressure to turn inventory. "If I (sold at under 12 cents), I
sure would have to explain it to my boss," he said.
But one consumer said premiums
were unlikely to rise until capacity came out of the market,
and that wont happen with Century Aluminum Co. buying and
continuing to operate Montreal-based Rio Tinto Alcans
facilities in Sebree, Ky., which include billet capabilities,
Monterey, Calif.-based Century
agreed in late April to acquire Rio Tinto Alcans
operations in Sebree for $61 million in cash and the assumption
of $4 million in liabilities. Century also received $71 million
in working capital from Montreal-based Rio Tinto Alcan as part
of the deal (
amm.com, April 29).
Inc.s review of its operations wont do the trick
either, the consumer said. Alcoa said it is considering cutting
as much as 460,000 tonnes of smelter capacity over the next 15
months as aluminum prices remain stubbornly low (
amm.com, May 1).
"There has been a little saber
rattling. But theyve got to do more than that to impress
people," the consumer said, reporting premiums at 12 cents to
12.25 cents "at most."
The cash primary aluminum
contract on the London Metal Exchange ended the official
session at $1,827.50 per tonne May 13, down 1.1 percent from
$1,848 per tonne May 10 and off 13.9 percent from a 2013 high
of $2,123 per tonne on Feb. 15.
The first billet producer said
his company had worked hard to limit maintenance downtime and
boost productivity as a result. "Because the price of metal is
so low, the plants are under a lot of pressure, and the only
tool they have in their toolbox is producing more to compensate
for lost revenue from the (low) price of metal," he said.
"Everyone is very focused on producing more."