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European aluminum talks seen running into 4th qtr.

Keywords: Tags  aluminum consumers, aluminum premiums, aluminum conference, aluminum contract negotiations, LME, Jethro Wookey


LONDON — European aluminum consumers expect 2014 supply negotiations to extend into the fourth quarter, well beyond AMM sister publication Metal Bulletin’s International Aluminum Conference in Geneva, Switzerland, later this month, due to uncertainty over premium levels.

"Normally we book all volumes that are strategically important at the conference, but we might take a different approach this time," one consumer said.

This year, falling premiums will stay consumers’ hands. The London Metal Exchange’s proposed changes to warehouse load-out rates have caused those warehouses offering incentives for metal deliveries to slash their offers, and premiums have started to follow.

Metal Bulletin’s European duty-paid aluminum premium stands at $245 to $265 per tonne, down about 10 percent since the LME announcement at the beginning of July (amm.com, July 5). Duty-unpaid premiums stand at $175 to $210 per tonne, down 17 percent on the low end over the same period.

Consumers are unwilling to book material ahead of further premium falls, which the consensus considers a certainty.

Offers have come even lower than the premium ranges. Consumers reported offers below $170 per tonne for unpaid metal, and below $230 per tonne for paid product. While deals at this level can be considered distressed sales—the majority of sellers aren’t offering these levels—it is unlikely that consumers will book at higher levels than those already offered to them.

Consumers are booking small, hand-to-mouth volumes in order to maintain operations.

They are comfortable doing so because aluminum is easy to find, with demand for financing deals shrinking in the face of possible regulatory measures that could result from ongoing lawsuits in several U.S. district courts against the LME and warehouse owners.

Consumers reported a huge range of offers on premiums, with one putting offers in a $70 range.

"Premiums are falling, but the problem is that there is a wider range of premiums than I have ever seen before," another consumer said.

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


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