EUROPE ALUMINUM ALLOY: Spot prices steady in strong end-year market

Spot prices for 226 -- the key grade of aluminum alloy in Europe -- were steady this week in strong end-of-year market conditions, sources said.

Buyers continued to request additional quantities for December delivery and were securing January volumes ahead of the Christmas shutdowns.

"There are still inquiries for both December and January delivery," a Polish producer said, adding it was an extremely positive end to the year.

"Even our customers are surprised with the scale of the new orders for January," she said.

A German seller agreed, saying demand had remained strong throughout the fourth quarter and looked likely to continue into the first quarter of 2015.

December is usually a relatively quiet month with both alloy producers and consumers looking to reduce stock levels before the end of the year.

However, this year has bucked the trend with strong demand levels seen throughout the month. Furthermore, diecasters have been keen to secure volumes for January delivery rather than wait and see what happens to spot prices in the new year.

Spot market prices for 226 in Germany continued to range from around Eur1,760-1,780/mt ($2,191-2,216/mt) delivered plus credit for larger buyers, and between Eur1,790-1,810/mt for smaller or mid-sized consumers.

Negotiations for first-quarter delivery have continued this week as consumers seek to firm up prices and volumes, confident demand was there.

Many consumers have fixed January and February delivery already, unlike in previous years when buyers were more cautious, fixing requirements on a month-by-month basis.

"Q1 prices are very similar to the last quarter of this year," the Polish producer said, adding the lowest price she had done was at Eur1,775/mt with the majority of business sold at Eur1,790-1,810/mt delivered.

Market players said, however, there were competitive offers in the market of Eur1,750-1,760/mt delivered. "I hear both the Spanish and Scandinavian suppliers are very aggressive at the moment," one source said.

A trader said one buyer had secured January 226 volumes at around Eur1,760/mt and 231 grade at Eur1,800/mt, but that he had also sold 100 mt for January at as high as Eur1,820/mt.

The Platts assessment of standard 226 grade spot was unchanged at Eur1,760-1,810/mt delivered Germany, including 30 days of credit. Spot indications for 231 were Eur10 lower at Eur1,800-1,850/mt delivered Germany.

Demand from the car industry, which accounts for around 85% of aluminum alloy sales, has been exceptionally strong throughout the second half of this year. High levels of demand were expected to continue into the first quarter, according to industry sources.

Data from auto analyst LMC Automotive showed that, in year-on-year terms, November saw global light vehicle sales slip for the first time since March 2013 to 87 million units/year following a record selling rate in October of over 88 million units/year.

"Demand in the likes of China, North America and Western Europe continued to build on year ago levels. However, Eastern Europe remains a concern (even with government support in Russia), while Japan and Argentina fell back sharply," LMC Automotive said.

The rate of recovery of the west European market slowed last month, with one fewer selling day versus November 2013. "In selling rate terms, after climbing above 14 million units/year in October, the latest month's result was a little lower at 13.9 million units/year; however, this continues to point to further market growth as we head into 2015," LMC Automotive said.

Year on year, the east European market was lower again in November, but not to the same degree as some falls earlier in the year, it said.

While, the Russian market's selling rate picked up, after some woeful months earlier in the year, helped by the government scrappage scheme as well as an element of a pull forward in sales prior to the anticipated vehicle price hikes due to the ruble's weakness, LMC Automotive said.

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