CHICAGO 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.
AMMs 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.
Market sources 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.