NEWSBREAK: Italy’s Raffmetal closes amid virus pandemic

Italian secondary aluminium producer Raffmetal will cease production from March 16-22 amid ongoing concerns from the spread of novel coronavirus (2019-nCoV) in the country, a source close to the matter told Fastmarkets on March 13.

At the time of publication the company, Europe’s largest secondary aluminium producer, had not responded to Fastmarkets’ request for comment.

However, it is understood that the company made the voluntary decision to close both its plants and offices for one week, ceasing production during that time.

The company produces an estimated 250,000 tonnes per year of secondary aluminium alloy, the majority of which is 226 aluminium ingot – a popular grade of secondary aluminium used in automotive production throughout Europe. 

The decision to close the plant and cease production for a week could take approximately 6,500 tonnes of material out of the market, which may be particularly damaging at a time when demand for aluminium ingots in Europe is high and logistical difficulties emanating from the virus add pressure on an already-stretched market. 

But Raffmetal will continue to deliver material to its customers over the period while also maintaining some necessary functions to allow the company to fulfill its contractual obligations.

In line with the production halt, all scrap and raw material collection will also be suspended, albeit for a lesser period from March 16-20.

The decision to suspend operations has been undertaken to protect staff while also attempting to prevent the spread of coronavirus in Italy, which has the most known cases outside of Asia – 21,157 recorded cases and 1,441 deaths as of Sunday March 15. 

During the shutdown, Raffmetal will assess ways it can improve organization and production so not to further endanger its workforce, though no employees have tested positive for the virus so far.

Italy extended nationwide emergency measures, including a ban on public gatherings and all non-essential travel on March 10, with the country’s prime minister urging people to stay at home the previous day.

There has been much speculation over the potential impact on Europe’s secondary aluminium market should Italian producers take themselves out – Raffmetal’s closure could be the first manifestation of this concern.

“The market is in panic,” a European trader told Fastmarkets.

“As far as the virus situation goes, Italy has shut everything and people are obliged to stay home,” a second trader said. “Only companies that want to and can equitably continue operating, can do so. But even they need to respect some protective and restrictive measures to protect their workers.”

The price of 226 aluminium ingot continues to rise, along with increased demand for material, with participants reporting that panic buying in Europe, market uncertainty and potential coronavirus-related logistical delays when producers are at capacity are making higher prices achievable.

Fastmarkets assessed the price of aluminium pressure diecasting ingot DIN226/A380, delivered Europe at €1,420-1,490 ($1,584-1,662) per tonne on Friday March 13, up from €1,420-1,480 per tonne the previous week.

The 226 aluminium ingot price has risen over 2020 since hitting a 10-year low at €1,260-1,290 per tonne on October 11, 2019 due to weak automotive demand for material – a range held until November 15, when the assessment began its incline, rising by 14% at the midpoint to its current level 
Market participants widely expect the price of 226 to rise further in coming weeks, should adverse conditions relating to the virus persist.

Indeed, some market sources expect producers will have to operate domestically while borders start to struggle with delays or even close in line with measures to stem the flow of the virus.

“We have really big problems at the borders, from Italy to Austria,” a third European trader told Fastmarkets. “There are 60 kilometers of trucks waiting to cross the border but it’s taking much more time because they all have to undergo virus testing before they can cross. Logistics are really difficult.”