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European duty-unpaid aluminium premiums fell sharply on Tuesday February 24, as market participants reported high levels of availability, coupled with a dearth of buyers.
The weighted average premium fell to $312.24 per tonne, from $335.25 previously, and the range moved down to $308-330 per tonne, from $327-350 per tonne, with further falls on the horizon according to some sources.
Prices have now fallen by almost $100 per tonne since the start of 2015. On January 2 Metal Bulletin assessed the duty-unpaid market in Rotterdam at $400-430 per tonne.
Lower prices have led traders and consumers to watch closely to see whether those holding material will seek to liquidate it at lower numbers still in a market where the number of spot volumes has risen sharply since the start of the week.
Over 12,000 tonnes of duty-paid (which Metal Bulletin assesses twice-weekly) and duty-unpaid (which Metal Bulletin assesses daily) has been sold since the start of the week as Metal Bulletin’s trade log details.
Metal Bulletin has launched a weekly newsletter to enable the market to stay in touch with aluminium premiums. Contact Merrin Higgins (m_higgins@metabulletin.com) for more details. “We’re waiting to see if there will be some panic selling, but it’s not happening yet,” one trader told Metal Bulletin.
The fall is also expected to filter through to duty-paid premiums in Europe, which Metal Bulletin assesses on Wednesdays and Fridays, as the two should be moving hand in hand, a second trader said.
“There’s really no longer a disconnect between duty paid and duty unpaid, and if there is, it’s very small,” he said.
“There’s no reason for supply and demand to change. China is really exporting a lot and material from the Middle East, India and Russia is coming to Europe,” he added.
Prices on the London Metal Exchange have also been weak, trading below $1,800 per tonne in recent days, as demand is not keeping up with supply.
“It’s carnage out there. It’s really an oversupplied market. Everybody’s a seller and hardly anyone is a buyer. The numbers are just crashing,” a source said.
Beyond this, at least some buyers are holding back, despite requiring material, as they wait to see whether premiums will fall still further.
“There are customers out there who still need material for the second quarter, but [a lot of them] are just waiting…consumers can smell the drop in premiums,” another trader said.
The outlook is bearish for premiums in Asia and the USA, a producer added, as they are likely to follow the European premiums’ lead.
Although deals of a few thousand tonnes remain relatively common, deals of 10,000 tonnes or more are disappearing from the market, he added, implying an overall drop in demand.
“I’m just waiting for the other markets to catch up. I think the USA [certainly] has to,” the producer said.
Claire Hack chack@metalbulletin.com Twitter: @clairehack_mb