Global aluminium billet premiums under pressure amid softening demand
Dwindling demand and differing supply situations between regions pressured aluminium billet premiums down or kept them unchanged across the world on Wednesday June 1, with clear bearishness slowly taking over global markets
European aluminium billet premiums edged down during May amid weaker demand from consumers, paired with higher material availability.
“The question is the demand; this is the most important thing. With energy or price, we will find a solution, but if we don’t have orders, that’s the main issue,” one producer source said.
“There is material coming in, [and] they use it as a negotiation argument,” they added. “It’s not just inflation in Europe; there is the war and seasonality, as we are getting closer to summer.”
Sellers spoke of continuing high prices on transport, freight, and general inflation costs, as well as elevated energy prices.
Fastmarkets assessed the aluminium 6063 extrusion billet premium, ddp North Germany (Ruhr region) at $1,470-1,540 per tonne on Wednesday, down by $10 per tonne on the high end from $1,470-1,550 per tonne on May 27.
“People are shying away from buying because they expect the [billet] premium to go down,” a trader source said.
Fastmarkets assessed the aluminium 6063 extrusion billet premium, ddp Italy (Brescia region) at $1,400-1,500 per tonne on Wednesday, a $20-per-tonne decrease on the high end from $1,400-1,520 per tonne on May 27.
“The pressure on billet premiums in Europe is getting bigger and bigger. Clients are well stocked, and it is becoming increasingly difficult to achieve $1,500 [per tonne] and above,” a third market participant said.
Fastmarkets assessed the aluminium 6063 extrusion billet premium, ddp Spain at $1,400-1,450 per tonne on Wednesday, down by $50 per tonne on the top end from $1,400-1,500 per tonne on May 20.
“There have been big changes on billet. The order intake has softened, and the automotive sector has not recovered. Orders are postponed and lead times are coming down,” a second producer source said. “Yards are full at smelters, with higher stocks at extruders.”
“We are fixing smaller tonnages with the rest later on, or July [tonnages] now and August later. The market is oversupplied with global shipments to Europe,” they added. “Consumers have been taking their time, but they have to book within in the next 10 days.”
The aluminium extrusion billet premium in the United States held steady on Wednesday in slowing spot trade in a week with public holidays in the US and the United Kingdom.
In a curtailed assessment period due to holiday schedules, Fastmarkets assessed the aluminium 6063 extrusion billet premium, delivered Midwest US at 26-30 cents per lb on Wednesday, unchanged from Friday May 20.
The premium is normally assessed every two weeks on a Friday but was priced on Wednesday due to public holidays in the UK on Thursday and Friday, June 2 and 3 to celebrate the Platinum Jubilee of Queen Elizabeth II.
The London Metal Exchange (LME) was consequently closed at the end of a week that began with the Memorial Day holiday in the US on Monday May 31.
“Spot sales are sluggish with the holidays,” one US producer source said.
Bearish sentiment even before the holidays had lessened spot buying, causing the billet premium to fall from its all-time high in the previous assessment on May 20.
The peak premium of 32-39 cents per lb had been sustained from March 25 through May 6 – a period when supply, not demand, was the concern.
Growing fears of recession have dampened demand, one US trader said, but US aluminium supply remains short, the US producer said.
“US supply is even shorter for billet than for P1020 [primary aluminium],” he said.
“P1020 is a more liquid market, but people [traders] don’t hold inventories of billet,” he added.
The benchmark US aluminium premium for P1020 – to which the billet premium is added – also declined on Wednesday.
Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US at 34.5-37 cents per lb on Wednesday, widening downward from 35-37 cents per lb on Tuesday May 31.
Normally assessed on a Tuesday and a Friday, the influential “Midwest premium” (MWP) for P1020 has been declining recently from its all-time high.
It has lost more than 4 cents per lb, a decline of more than 10% since it was at 39.75-40.25 cents on May 3.
A 40-cent-per-lb midpoint for the MWP was a 19-year record level in Fastmarkets’ assessments, dating to 2003.
At the time of the last billet assessment, on May 20, the P1020 premium was 36.75-37.5 cents per lb.
The aluminium billet premium in Thailand fell during the month to Wednesday June 1, due to a combination of weaker downstream consumption and lower prices on the LME.
Fastmarkets’ monthly assessment of the aluminium 6063 extrusion billet premium, cif Thailand was $460-490 per tonne on Wednesday, down by 7.3% from $475-550 per tonne four weeks before.
Thin liquidity and supply tightness deepened in that period. Buying appetite was low, but producers were also reluctant to reduce offers, citing limited availability.
“My customers have recently even requested to reduce volumes delivered via long-term contracts,” a Singapore-based trader said, adding that the automobile sector was still suffering from shortages of some key components.
The softening LME price has spurred some spot enquiries, however, because of this, and customers were also reducing bids, further gaining an upper hand in the deadlocked market.
The light metal’s three-month price on the LME has been rangebound below $3,000 per tonne in the past month and closed at $2,729 per tonne on Wednesday. It had been well above the psychological level of $3,000 per tonne before May.
In the Brazilian spot market, aluminium billet import premiums were unchanged amid a lack of buying interest, non-competitive offers compared to domestic material, and weak overall demand.
Fastmarkets’ assessment of the aluminium 6063 & 6060 extrusion billet premium, cif Brazilian main ports was $750-800 per tonne on Wednesday, stable from May 20 and down by $20-30 per tonne from $780-820 per tonne on May 6.
Consultations from customers were so rare that most sellers stopped offering import cargoes into the country. Most of those were reported at the bottom end of the assessed range, although some still saw $800 per tonne as likely.
At least one market participant said he could be able to offer at $720 per tonne but did not expect any demand stemming from that.
“Demand is very weak right now, and especially for spot metal,” one trader source in Brazil said. “Any necessity would be easily covered by domestic material with lower premiums.”
Aluminium producer Companhia Brasileira de Alumínio (CBA) said in its recent earnings report for the first quarter that it was exporting more billet to offset lower consumption from local clients. The company shipped 9,900 tonnes in the January-March period, compared with 900 tonnes a year before.
“If CBA is exporting, I don’t see why buyers would need imports,” a second Brazilian trader source said. “I don’t expect to close any spot deals for imported billet anytime soon.”