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Aluminum Premiums Outlook Update (October 7, 2019)


Executive Summary


1. (From October 4). US 2020 billet negotiations may not be finalized until late in the year; buyers opting for eleven-month contracts.

Some 2020 contract billet negotiations could extend until late this year/early next year as several extruders seem to be aware of the reigning oversupplied billet market and expectations for these conditions to linger and intensify ahead. Meanwhile, various 2020 annual contracts have been signed for eleven months due to extruders’ current higher-than-expected billet inventories, weakening demand, and bearish 2020 regional demand prospects. Looking ahead, we expect 2020 contractual billet premiums to substantially decline when compared to 2019 premiums.

More details in full report.

2. (From October 4). US PFA spot and 2020 contract premiums declining amid regional PFA oversupply, the ongoing GM strike, and weakening US auto sales.

The US spot market demand remains practically dead, and some suppliers seem offering lower PFA premiums in the market to try to lure some consumers at a time when downside pressure for the North American auto industry is intensifying due to significant sales declines from various OEMs like Toyota, Honda, Nissan, Subaru, and Hyundai. Meanwhile, the GM union strike is expected to further push down regional PFA demand, while contract talks between the United Auto Workers and other automakers like Ford seem to be progressing.

More details in full report.

3. (From October 3). US EC wire rod premiums increase to 14.5-18.5 c/lb on import delays.

The US EC wire rod market has tightened further as various offshore suppliers seem to be late on shipments. This development seems to be impacting not only the EC but also other wire rod niche markets (like Deox and Magnet Wire) at a time when North America’s wire rod dependency on offshore units has increased due to lower regional production than last year. Looking ahead, we expect the North American wire rod deficit to decline in 2020 due to several Canadian-based ramp ups.

More details in full report.


4. (From October 4). Spot billet premiums in Italy fall below $300 per mton while decline continues in the rest of Europe.

Italy billet spot premiums have fallen below the $300 per mton threshold with the latest confirmed transactions now taking place closer to or below the low end of our new spot premium range, which fell today to $290–$330 per mton from $310–$335 per mton previously. Also, we can confirm recent Italian spot offers have been rejected at premium levels closer to the high end of our premium range. Current regional oversupply conditions, strong competition for market share, and expanding billet capacities of some suppliers continue to push some suppliers to offer units at lower premium levels.

More details in full report.