European Aluminum Alloy Prices Move Sideways in Quiet Market

Recycled aluminum prices moved sideways this week in quiet market conditions amid public holidays in several European countries.

Spot market price indications for Europe's key grade of aluminum alloy, 226 ingot, were heard wider at Eur1,680-Eur1,750/mt ($1,949-$2,019/mt) delivered plus credit.

"The market was very quiet this week because of holidays," said an Italian alloy producer who said 226 was trading at Eur1,700-Eur1,750/mt. Two other producers also agreed that prices were largely in this range.

Spot prices in Germany this week tipped slightly lower for December delivery.

A diecaster who was in the market said: "We got offers which were Eur1,700-Eur1,750/mt for December delivery, but after negotiations we achieved around Eur1,680/mt." He said the most competitive offers came from eastern and northern Europe.

A German producer also said the market had been very calm this week, but that first-quarter price talks were beginning. "Most of the [original equipment manufacturers] are working out their requirements and we expect next year to be another strong one in terms of demand," he said.

Despite the recent bearish tone, prices are widely expected to move higher ahead of the Q1 price talks in the coming weeks.

"The key driver for higher prices will be the continued strength of the LME, in particular aluminum and copper, and also the knock-on effect of higher silicon metal prices," said the European producer.

The rising cost of raw materials such as copper and silicon, which have been on an upward trajectory since the summer months, is beginning to filter through to secondary aluminum prices, sources said.

"I see no reason for secondary prices to move lower ... if you compared the cost of alloying elements such as silicon and copper now compared [with] August, they are Eur70/mt more expensive," said the Italian producer.

The thin availability of silicon metal has pushed spot market prices up over the past few months, with grade 441 silicon trading at Eur2,100-Eur2,200/mt delivered Germany. One buyer said he fixed end-November volumes this week at Eur2,180/mt delivered plus credit.

Competition for aluminum scrap has intensified as the price of primary aluminum on the LME has risen. "The billet and rolling producers are also competing for secondary aluminum scrap as primary aluminum prices have gone sky high," said the Italian seller. "The main grade of billet 6061 is now some Eur450/mt above secondary 226 prices at Eur2,150/mt ... ingot prices will have to go up sooner or later."

There were also concerns that given the low price of secondary aluminum and relatively high input costs for scrap and other metals, the market could see some insolvencies.

"When you continue to sell below production costs then someone will eventually have to give up," said the Italian producer. He said given that European secondary consumption is growing every year, supply and demand in the region were looking more or less balanced, which suggests prices should begin to firm.

"Refiners appear to be well-covered for November and December and we aren't seeing too many aggressive offers in the market this week," said a Spanish seller.

Aluminum scrap is the main input cost for recycled aluminum and scrap dealers watch the price of primary aluminum on the LME for direction.

The LME's official cash settlement price for primary aluminum was $2,165/mt (Eur1,865/mt) Friday, up $46/mt from $2,119/mt a week ago and up $39.50/mt from $2,125.50/mt four weeks ago.

S&P Global Platts' weekly assessment of standard-grade 226 ingot was wider this week at Eur1,680-Eur1,740/mt delivered Germany plus credit than a Eur1,690-Eur1,740/mt delivered Germany plus credit range a week earlier.

Platts' weekly assessment of 231 alloy was unchanged at Eur1,730-Eur1,780/mt delivered Germany plus credit.