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Aluminum Premiums Outlook Update (July 1, 2019)

Executive Summary


1. (From June 25). The APEX Act was introduced today in the US Senate. Bipartisan support to investigate and regulate the MW premium continues to further gain momentum on the Hill.

Senators Cory Gardner (R-CO) and Tammy Baldwin (D-WI) introduced today the Senate version (S. 1953) of the APEX Act (Aluminum Pricing Examination Act), which had been previously introduced in the House of Representatives (H.R. 1406) in February by Representatives Lawson Jr (D-FL) and Buck (R-CO). The introduction today of the APEX Act in the US Senate, and the growing number of co-sponsors on both sides of the aisle, bring the Act closer to becoming law.

More details in full report.

2. Contraction in regional automotive production and increasing supply keeping North American PFA (A356.2) spot and 2020 contract premiums under pressure and expected to push them lower.

North American primary foundry aluminum (PFA) demand is under pressure as we can confirm most North American PFA consumers seem to be asking for their minimal contractual order volumes allowed per annual contract. Practically all major PFA producers are long as the North American, Latin American and European PFA markets are in a temporary oversupply situation. Looking ahead, we expect the North American PFA spot and 2020 contract premiums to be pressured down.

More details in full report.


3. (From June 26). European billet spot premium decline continues. Traders aggressively marketing some Tier 2 units. European billet exports rising due to oversupply.

European billet spot premiums continue to fall across the board with all the latest confirmed spot transactions taking place below $400 per mton. Two traders are aggressively marketing billet units in Southern Europe from a Tier 2 producer. Meanwhile, extruders' lead times fall further from 4–5 weeks to 1–3 weeks, as regional extrusion demand weakens further, especially in Northern Europe and Italy where we have confirmed lead times as short as one week.

More details in full report.

4. (From June 24). European wire rod spot premiums up, but H2 contract premiums lose ground

HARBOR's European full EC rod spot premium duty-paid delivered has increased to 380–460 euros from 370–440 euros with the latest confirmed spot transaction in Southern Europe taking place closer to the high end of our new range. On the contractual side, H2 premiums have declined, as our intel from the ground indicates some contracts have been closed with a small discount of 5–10 euros per mton when compared to H1 2019; some European wire rod producers have shown flexibility and decreased premium levels a bit to better align with customer requests and to try to maintain/gain market share.

More details in full report.