European spot prices for secondary aluminum alloys drifted lower this week as sellers continue to battle for sales in an overcrowded market.
Competition for sales has mounted since demand jumped in the second quarter of 2015, and since then producers across Europe have lifted production levels with the result that the market is well-supplied.
Sales activity was ticking over this week, but with less volume than seen in the previous weeks when many third-quarter contracts were fixed.
"It's not been too busy this week," said an East European trader. A German alloy producer said that one of the reasons demand was lower was that many diecasters are covered ahead of the summer shutdown season.
A monthly buyer fixed August volumes at around Eur1,575-Eur1,580/mt, delivered Germany, for 226 grade and at Eur1,605-Eur1,610/mt delivered for 231 grade. The 226 offers were initially higher at Eur1,590-Eur1,600/mt, but the business was won at lower levels.
Also this week, another German consumer was seeking 226 for delivery in July and the first half of August. Offers were also initially around Eur1,600/mt delivered, and sellers were expected to drop their prices to obtain the business.
"The market was trading at Eur1,580-Eur1,590/mt, delivered, this week to larger buyers and at Eur1,620-Eur1,630/mt to those buying truckloads," said the German alloy producer.
In Eastern Europe, a large buyer in Slovakia was also in the market for Q3 tonnage and was heard bidding Eur1,540/mt delivered, against offers ranging between Eur1,580 and Eur1,610/mt delivered.
A Polish producer said the majority of 226 sales this week had remained at around Eur1,590-Eur1,630/mt delivered.
Sales of primary alloy grade 230 remained competitive this week at Eur1,720/mt delivered, with 239 grade at Eur1,700/mt delivered, sources said. Scrap prices remained stable this week.
The Platts weekly assessment of standard 226 grade fell Eur15/mt to Eur1,575-Eur1,625/mt delivered Germany from Eur1,590-Eur1,640/mt a week earlier, reflecting 30 days' credit terms.
Spot indications for 231 grade also were lower at Eur1,605-Eur1,655/mt delivered Germany, plus credit, down from Eur1,620-1,670/mt a week ago.
MARKET DIGESTS UK'S BREXIT VOTE
Market players Friday were digesting the UK's vote Thursday to exit the EU and what that would mean for the European secondary aluminum market.
"It's too early for any repercussions on the physical market, but the LME reacted negatively and has since recovered ... the currency will be the main problem," said a German trader.
The LME's official cash settlement price for primary high-grade aluminum was $1,600.50/mt Friday, having lost recent increases, but virtually unchanged from the week-ago level of $1,602.50/mt. It still registered a $48.50/mt increase from four weeks ago when the price was $1,552/mt on May 27.
A German alloy producer agreed, saying it was too early to have a clear view on how the UK's exit from the European Union would affect the 226 market.
"I doubt the UK's exit will have a big effect immediately," said a European diecaster.
The British pound fell sharply against the dollar and the euro.
"A weaker pound would make UK alloy exports very competitive, but it's too early to say what the real effect of the Brexit will be on the European secondary market," said the German trader.
LMC Automotive, in conjunction with Oxford Economics, said Friday it had lowered its forecast for light vehicle sales in the UK following the vote to leave the EU, because of sterling depreciating, lower economic growth and weaker confidence.
LMC is now forecasting UK car sales of 2.98 million units in 2016 against a previous forecast of 3.1 million units, 2.68 million units in 2017 compared with 3.07 million units previously and 2.55 million units in 2018 against 2.97 million units previously.
There will also be a negative impact on the EU car industry, as the depreciation of sterling will effectively lead to higher prices for imported vehicles, LMC Automotive said.
"The UK imports almost 90% of its light vehicles, of which 80% are imported from the EU. The loss of sales volume of 410,000 units in 2018 alone will therefore impact European build most heavily," LMC Automotive said.
Meantime, aluminum alloy consumption in Europe remains on track to register a small increase in 2016, sources have said.
The latest figures on demand for new commercial vehicles in the European Union for May showed a rise for a 17th consecutive month to 187,134 units, up 16% year on year, European auto manufacturers' association ACEA said Thursday.
"Growth was sustained across all segments of the commercial vehicle market. Looking at the largest markets, Italy recorded the highest upturn (+35.9%) followed closely by France (+27.2%) and Spain (+17.3%)," ACEA said.
In the first five months of the year, the EU market expanded by 13.5% compared with January-May 2015, totaling 946,128 commercial vehicles.
During that period, Italy (30.6%), Spain (13.9%), France (13.1%), Germany (10.2%) and the UK (3.8%) all posted growth.
