Aluminum billet premiums remained flat in a slow year-end
market characterized by little spot availability and mounting
concerns about the potential impact of low metals prices on the
London Metal Exchange.
spot Midwest 6063 extrusion billet upcharge premiums remain
unchanged at 11.5 to 12.5 cents per pound.
Some market sources
said they expect premiums to ease as producers look to unload
metal before year-end. But others said they had already tested
spot waters and found no discounts available, a trend contrary
to past years that have seen year-end spot fire sales as
contract negotiations conclude.
Reasons offered for
the change included maintenance outages at some producers that
were lasting longer than usual, slightly decreased capacity at
others and a continued push by suppliers to move consumers onto
long-term contracts. That is a trend some buyers said they aim
to buck in 2014 by buying less metal than required under
contract, leaving open the possibility to buy spot metal at
what are expected to be lower prices next year.
But other market
sources questioned why billet prices might trend lower in an
improving market that could tighten if construction improves
significantly in 2014, especially when primary producers are
looking to hold on to every penny in premiums, whether billet
upcharge or Midwest, to make up for low LME prices.
generally predicted billet prices would hold steady in 2014
unless LME tags move significantly lower. That could drive
production cuts and push up all-in billet prices, as any cuts
might boost Midwest premiums and LME prices even if the billet
upcharge remains flat, they said.
But before any cuts
take place, producers might examine a reduction in capacity in
the hopes that announcements alone might nudge LME prices and
regional premiums higher, market sources said.