Aluminum billet premium outlooks have diverged as annual
contract negotiations shift into high gear, with consumers
arguing that premiums should ease in 2014 on less-than-robust
demand and increased capacity, while producers insist they will
hold or increase premiums and that additional capacity is not
yet a factor in the market.
The disagreement comes
as the Aluminum Extruders Councils Management Conference
and the Institute of Scrap Recycling Industries
Commodities Roundtable Forum get underway in Chicago this
Many producers and
consumers are expected to hammer out annual deals during or
soon after the events.
spot billet premiums have dipped to 11 to 12.4 cents per pound
from 11.5 to 12.75 cents previously. While some producers said
they had booked business at premiums of 11 cents, others
insisted they would not let metal go for less than 12
On the contract front,
while producers and consumers disagree on the direction of the
market, both acknowledged that deals arent being signed
with the urgency they were in 2012, when there were concerns
that a possible shutdown at Alcoa Inc.s majority-owned
Aluminerie de Bécancour Inc. could cause a billet
shortage in 2013. The rumored shutdown never happened (
amm.com, Feb. 22).
This year has seen
contract talks progress along a more traditional timeframe,
market sources said.
trying to talk it down because ... youre coming into the
mating season right now," one trader said. Business also is
slow on the spot side. "People are guarded for the fourth
quarter about their inventories for year-end. Theyll take
quantities from their annual contracts. Youll see some
spot material here and there, but it will only be on absolute
need," he said.
The market is "dead,"
one producer source said, with automotive solid but other
sectors flat or down. "Demand is steady, but it hasnt
picked up. Contracted volume is slowing, and people dont
have incremental sales to support additional spot volume
because they are struggling just to maintain their minimum
contract quantities," he said, referring to "min-max" supply
But other market
sources, especially other producers, strongly disagreed with
such bearish sentiment. "From everything I see, contracts are
holding or exceeding last years prices," a second
producer source said. "We havent backed up one inch on
pricing." He also brushed aside concerns about new capacity as
not relevant to 2014 negotiations. "You cant extrude
announcements. You can only extrude billet," he said.
announced capacity expansions, Matalco Inc. has short-listed
Indiana, Michigan, Ohio and Pennsylvania for its planned
$70-million remelt extrusion billet facility (
amm.com, Aug. 26) and Global Aluminum (USA) Inc.
is planning to upgrade its Aluminum Shapes LLC and Signature
Aluminum Canada Inc. operations (
amm.com, Sept. 13).
A third producer
source said contract talks were progressing well. "The music is
going and the dance has started," he said. "Pricing is slightly
better this year, but its nothing to write home about.
Its nothing like the 2012-13 rollover."
There is some
uncertainty about power agreements at other billet producers,
he said, but in general his company was seeing a return to
normal contract-season patterns, with smaller customers
generally signing pacts earlier than large buyers, who continue
to fight for better deals.