ALUMINIUM BILLET WRAP: Europe, US billet premiums hit fresh all-time highs; 2022 negotiations in focus [UPDATED]

Premiums in Europe and the United States continue to push higher, with market participants starting to negotiate contracts for 2022 supply.

Europe
Fastmarkets assessed the aluminium 6063 extrusion billet premium, ddp North Germany (Ruhr region) at $1,220-1,270 per tonne on Friday August 27, up from $1,200-1,250 per tonne a week earlier and from $1,190-1,240 at the beginning of the month.

Fastmarkets’ assessment of the aluminium 6063 extrusion billet premium, ddp Italy (Brescia region) also increased to $1,220-1,270 per tonne on Friday from $1,200-1,250 per tonne the week before.

Spot premiums are relatively muted, with the focus on long-term negotiations for supply in 2022.

“The spot market was pretty quiet, I didn’t have any requests during August, to be honest,” a producer in Europe said. “The discussions I’ve had are all for next year.”

Market participants are reporting offers for first-quarter supply at much higher levels compared with those for spot, in a range of $1,300-1,500 per tonne.

Fastmarkets assessed the aluminium 6063 extrusion billet premium, ddp Spain at $1,220-1,270 per tonne on Friday, up from $1,180-1,250 per tonne on August 13.

United States
Fastmarkets assessed the aluminium 6063 extrusion billet premium, delivered Midwest US at a fresh all-time high of 23-27 cents per lb on Friday, up from 22-26 cents per lb on August 13.

Spot deals were said to be limited, with many sellers prioritizing their contract customers. Market participants noted that an extruder seeking spot units would need to pay a steep premium due to thin supply.

Long-term contract negotiations are underway and are expected to conclude early, with extruders worried about securing supply.

Overall demand remains strong, with extruders’ massive backlogs keeping contract metal consumption strong.

Brazil
Fastmarkets assessed the aluminium 6063 & 6060 extrusion billet premium, cif Brazilian main ports unchanged at an all-time high of $490-510 per tonne. The assessment has not changed since July 30.

The midpoint of the range has risen by 117.39% from a record-low midpoint of $230 per tonne on July 17, 2020.

Offers were closer to $500-510 per tonne, although a few sellers were still mentioning $490 per tonne. No deal was reported amid a drastic reduction in interest for spot material.

“I see offers at $500 [per tonne], but the truth is even that level is too low. It will soon become unfeasible to sell for such premiums,” one trader source said.
Customers were concerned about rapidly rising global premiums or were well-stocked via contracts, participants said.

“[Spot] billet sales have been too slow lately, since too much material arrived in ports at the same point in recent weeks,” a second trader source said. “There are some clients with 2-3 months in stock.”

A strong rebound in the construction sector has yet to affect aluminium billet contract volumes, according to local producer Companhia Brasileira de Alumínio (CBA).

“The civil construction sector has shown a strong performance, with a pace faster than before the [Covid-19] pandemic,” CBA chief executive officer Ricardo Carvalho said in a press conference on August 26. “The aluminium extrusion billet market is still extremely heated, but we have more than 90% of sales under contracts to prevent being too dependent of spot sales.”

Thailand
Fastmarkets’ assessment of the aluminium 6063 extrusion billet premium, cif Thailand, was at $360-400 per tonne on Friday, a record high but unchanged from July 2.

Supply remained tight in the region amid high global premiums. Sources pointed out that although market dynamics that have driven premiums to all-time highs persist, disrupted trade flows prevented changes to premium levels.

“Yes, producers are quoting us at $400 per tonne. But they’re not really offering stocks unless we transact above that price,” a Singapore-based trader said.

The premium has hit repeated record highs since April this year when it first surpassed the previous all-time high of $250-260 per tonne from April 2017.

Spot market activity has been scant for most with demand impacted by the ongoing coronavirus outbreaks in Southeast Asian countries.

Several extruder facilities across Thailand and Vietnam have returned to operations but are not running at full capacity due to ongoing labor restrictions within the country.

Additionally, constructions sites experiencing outbreaks of Covid-19 were forced to temporarily stop construction activities, leading to lower demand for billet products.

Robust global freight rates also capped any significant movement of material to regions with better premiums, keeping supplies in the region amid softer demand.

“Stocks meant to move outside the region are still stuck at our warehouse because we can’t find containers and freight rates to the US have tripled [compared with the same time last year]. There’s no space within the warehouse, which affects my operational capacity,” a Southeast Asian source said.

According to market sources, freight rates from Thailand to the US are estimated to be around $10,000 for a 40-foot container. Recent offers were heard at the high end of Fastmarkets’ range.

[Editor’s note: This article was first published on August 27. It was updated on August 30 to include commentary for the Thailand market.]

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