European aluminum alloy trade thin as consumers study higher offers

Spot trade of 226, the main aluminum alloy grade, was slow this week, with consumers wary of higher prices, and partly because of the shorter working week.

A number of producers have pushed offers of 226 ingot up to around Eur1,700/mt ($2,350/mt) delivered plus credit in the past two weeks on the back of higher LME prices.

"We are pretty well booked for May and June. We are offering at Eur1,700-1,720/mt delivered, and not below," said a German producer.

An Italian producer said he too was offering around Eur1,700/mt delivered, adding the spot market was relatively quiet.

These higher prices have yet to be truly tested as a number of larger buyers have already booked tonnage for second-quarter delivery and most medium-small consumers are booked for May.

"I have fixed all my demand for Q2 already," said a German diecaster who said he had booked 226 ingot at Eur1,630-1,640/mt plus credit.

European secondary aluminum producers raised prices after primary aluminum prices moved higher on the LME. Although aluminum alloy is based on physical market prices, scrap is the key ingredient, and scrap dealers watch primary aluminum on the exchange for direction.

"Aluminum is stable on the LME. It has not fallen below Eur1,300/mt. So, that is one of the reasons why 226 ingot prices have not gone down," a trader said.

The official cash settlement price on the LME Thursday was $1,840.50/mt, little changed from $1,837.00/mt a week earlier and well above $1,682.50/mt on March 27.

"The LME may be trading higher but there is still enough secondary aluminum available in Europe and I do not think the situation will change for the rest of the year as China is not performing as it was expected to do so," said the German diecaster.

In previous years, Asian buyers have bought good quantities of aluminum scrap, but, because of lower than expected growth, European scrap exports have slowed.

Many in the market said it could be difficult for secondary aluminum producers to raise prices significantly ahead of the summer lull in demand unless there was a sudden sharp shortage of 226 and scrap.

The Platts European assessment of standard 226 grade spot prices remained steady this week at Eur1,650-1,710/mt delivered Germany, including 30 days of credit. Spot indications for 231 grade were also flat at Eur1,680-1,740/mt delivered Germany.

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