Europe's spot market for aluminum ingot 226 bounced higher by around Eur10-20/mt ($11-$23/mt) this week on tight summer supply and strong demand.
"A lot of buyers thought that prices would go down during the summer but the market has moved up as there's not so much material around for August, and also September is getting tight," said an Italian alloy producer.
Secondary aluminum prices, after hitting a year high of Eur1,820-1,880/mt toward the end of March, have fallen back significantly, losing some Eur170/mt to fall to a low of Eur1,650-1,700/mt delivered by the end of June.
Some producers are thought to have turned down production levels slightly in reaction to low prices and short-term supply appearing lower.
A number of secondary aluminum smelters, fed up with extremely low ingot sales prices, have raised their price levels to around Eur1,700/mt, a level which they calculate is more realistic when scrap costs are taken into account, sources say.
"We raised our prices for 226 ingot to a minimum of Eur1,700/mt two weeks ago," said a Polish producer. He said that while they had sold a few trucks so far they need to keep prices above Eur1,700/mt delivered because of high scrap costs.
A trader said that he, too, had sold at higher prices this week of around Eur1,690/mt delivered for August/September delivery. "There was some buying at Eur1,650-1,670/mt delivered last week ... the price is rising to Eur1,670-1,700/mt delivered," he said.
Spot market prices this week were heard at Eur1,660-1,690/mt delivered for larger buyers and at Eur1,700-1,720/mt delivered for smaller buyers or those seeking prompt delivery.
"It seems we are in a situation where prices aren't going down anymore," a Spanish producer said. He expected 226 prices to readjust over the summer months to around Eur1,700/mt delivered as supply would remain tight because of the upcoming summer shutdowns.
Activity levels were surprisingly good this week, in part because of high levels of demand from diecasters working for the automotive industry, several producers said.
"Italian smelters have increased their prices to Eur1,700/mt and with the LME strong, buyers are thinking this may be the bottom of the market," a German alloy producer said.
A German buyer said he saw the 226 ingot market price stable with a tendency to firm. "Offers are between Eur1,660-1,720/mt delivered," he said, adding that for larger quantities buyers could achieve around Eur1,660/mt delivered.
Meanwhile, a second diecaster said that market prices were above the recent low of Eur1,650/mt delivered this week. "Italian producers won't sell at Eur1,650/mt or below anymore," she said, adding that a trader offer this week was even higher at Eur1,695/mt for August delivery.
She said that prices for new orders for delivery in August and September looked set to rise to Eur1,680-1,700/mt in the next few weeks.
S&P Global Platts' weekly assessment of standard grade 226 ingot moved up Eur10/mt to Eur1,660-1,710/mt delivered Germany, plus credit, up from Eur1,650-1,700/mt delivered the previous week.
Prices for 231 alloy also increased by Eur10/mt to Eur1,700-1,750/mt delivered Germany, plus credit.
SCRAP REMAINS FIRM, OETINGER FOR SALE
Scrap prices have remained firm in contrast to the fallout seen in 226 ingot prices, and this imbalance has continued to squeeze producer margins.
"We need to raise ingot prices as scrap is very difficult to find right now and it is only going to get more difficult in the holiday period," said the Polish alloy producer.
The German diecaster also sells scrap and confirmed that aluminum scrap prices had remained very firm as demand was still so strong.
"You're lucky if you can just repeat the scrap prices of the previous week," the Spanish alloy producer said.
Scrap dealers watch both the physical 226 market as well as the LME primary aluminum market to gauge scrap price direction. Primary aluminum prices on the exchange have remained firm and this has kept scrap prices high too.
The LME's primary aluminum official cash settlement was $1,920/mt Friday, up $11.50 from $1,908.50/mt a week a ago on June 30 and was $19.50/mt higher than $1,901.50/mt four weeks ago on June 9.
In other news, it was announced this week that German secondary aluminum producer, Oetinger Aluminum, was to be put up for sale by its owner, private equity investor Special Situation Venture Partners III, which is one of the funds managed and advised by private equity firm Orlando Management.
"At the moment I can't give further information regarding the process. I can only confirm that Orlando/SSVP III are considering selling the company," Oetinger's CEO Roland Keller said in an interview Thursday.
News of this potential sale has added an air of uncertainty to the market and could also be a reason why prices are moving higher, market sources agreed.
Oetinger officially became insolvent on September 1, 2013, and SSVP III officially became the new owner of Oetinger on December 1, 2013.
Oetinger has two plants in Weissenhorn and Neu-Ulm in south Germany, which produce around 180,000 mt/year of aluminum alloy both in liquid and ingot form, predominantly for the automotive industry.
It had already closed two other secondary aluminum plants in Germany -- a 35,000 mt/year facility in Berlin and its 80,000 mt/year Hanover plant -- before SSVP III purchased the company.
