Average spot P1020 aluminum premiums in Brazil are at
$600 per tonne, with market participants attributing the rise
to higher U.S. Midwest premiums.
Local premiums, which
were at a minimum of $500 per tonne in mid-January, are being
driven by increased demand and falling domestic production.
Historically, Brazilian premiums have followed movement in
spot P1020 premium was at 20.75 to 21 cents per pound Jan. 30,
up on the low end from 20.5 to 21 cents per pound Jan. 22 (
amm.com, Jan. 30). Premiums were at 11.5 to 12
cents at the beginning of January.
"It is simple math.
Producers add the Midwest (premium) to how much it would cost
to import. Their advantage is that they can deliver within a
minimum of seven days, whereas imported material can take up to
two months to arrive in Brazil," one market participant told
AMM sister publication Metal Bulletin.
"This model was
created decades ago and has never changed," the director of an
aluminum company said.
Low London Metal
Exchange aluminum prices and infrastructure issues in the South
American country also contribute to increased costs.
For instance, the cost
of bringing material from Brazils northeastern regions,
where Consórcio de Alumínio do Maranhão
(Alumar) smelter is located, to São Paulo, could reach
13,000 reais ($5,363) per truck, carrying 27 tonnes per travel,
according to an estimate by Neuto Reis, executive technical
director of Brazilian national association of cargo
"That is equivalent to
an additional $200 per tonne only in transport," another source
Local producers also
complain of the impact of high electric energy tariffs on
"The fragile link in
the chain is electricity," Otávio Carvalheira, primary
aluminum group coordinator for Brazil aluminum association
government announced power tariff reductions of up to 32
percent for industrial, agricultural and retail customers in
the beginning of 2013.
smelters, however, acquire energy through contracts settled in
the free market, which arent directly affected by the new
base materials specialist at Boston-based consultancy Bain
& Co., has forecast three possible scenarios for the
Brazilian aluminum market this year.
The first scenario
shows Brazilian primary producers responsible for imports to
"The companies would
try to calm the domestic market a little and not let new
players in," Massarente explains.
In the second
scenario, aluminum consumers would explore their options,
including exporting or negotiating locally.
The third possibility
would be a stronger performance from traditional traders, which
would increase volumes brought to the country. "In this one
there would be no permanent importer. Traders would look for
the best offers," the executive said.
A mix of all options
isnt being ruled out either. "I see a bit of everything
happening at the moment. Primary producers are looking for
imports, traders are setting deals and consumers are
considering all their options," an aluminum buyer added.
A version of this
article was first published in AMM sister publication Metal