European market prices of the key grade of aluminum alloy, 226, slipped back by a further Eur10/mt ($14/mt) this week as buyers could take their pick of offers in a well-supplied market.
"It's very calm. Last week there was a lot of business done," said a German producer who added that buyers were very cautious over purchasing in a sliding market, with many booking 226 ingot on a monthly basis.
Buyers appeared to be taking a breather from purchasing alloy this week after significant quantities of Q2 volumes were bought over the last couple of weeks, said a trader.
The European market still looks oversupplied despite the round of second-quarter buying in early March, he said: "Everyone thought that with all the big Q2 buyers in the market over the past two weeks that this would squeeze supply and prices would go higher but that has not been the case."
A German diecaster said that he had agreed 226 grade prices at Eur1,640-1,650/mt delivered plus credit for large quantities for delivery in April and also for around 400 mt for May.
"I predict prices will come under much more pressure... We're already at around Eur1,650/mt compared to higher prices a month earlier. The LME is low and there's good scrap availability," he said.
Other buyers have previously agreed prices at similar levels of Eur1,640-1,660/mt delivered plus credit over the past few weeks.
Prices for 226 in eastern Europe have pulled back hard, said a Polish seller. "I heard some buyers in Czech Republic got offered Eur1,620/mt, while in Hungary sales prices are between Eur1,620-1,640/mt, and I even heard as low as Eur1,570/mt from Ukraine with pre-payment terms," said the seller.
Spanish prices echoed the levels seen elsewhere, with one producer saying prices were at Eur1,600-1,650/mt delivered plus credit. Demand for alloy because of improved car production levels is expected to recover in Spain, but it will still take time, sources said.
"Buyers say they will need higher volumes because there are lots of new projects but it's not materialized as yet," said the producer.
Most producers believe that prices are nearing the bottom of the market. Market prices are predicted to fall to reach a low of Eur1,600/mt during the slacker summer months.
A number of sellers said they have already noticed an uptick in requests for additional quantities, possibly because some diecasters feel prices are near the turning point and will head up end-August/September.
The Platts European assessment of standard 226 grade softened by Eur10 to Eur1,640-1,690/mt delivered Germany, including 30 days' credit. Spot indications for 231 grade also dipped to Eur1,680-1,730/mt delivered Germany. SALES STRONG, SCRAP CONCERNS
Aluminum alloy sales volumes in Europe are still strong, leading to expectations that 2014 will be higher than 2013.
"We're selling really good volumes... much more than expected. It's disappointing about the price as we just don't achieve good enough margins between the scrap and 226 ingot price," said an Italian producer.
He warned that if the squeeze on margins continued, further insolvencies would occur.
"It will happen again [referring to German producer Oetinger's insolvency in 2013] and buyers are playing with fire," he said suggesting that if scrap prices jump up then some sellers may not be able to deliver against forward Q2 sales.
Aluminum scrap continues to be readily available in the German market and elsewhere in Europe, possibly due to the lack of exports to Asia at present. However, this situation is expected to change as Indian and Chinese scrap buyers are likely to re-enter the market shortly.
"There's no space to produce [226] with a profit... scrap dealers won't deliver that much at low levels and will prefer to export it," said the Polish producer.
There are also growing concerns that Novelis's new $250 million recycling and casting center in Nachterstedt, Germany, which is due to be completed in July, will take large amounts of scrap out of the European system leaving aluminum alloy producers short of the key ingredient.
The plant will produce up to 400,000 mt/year of aluminum sheet ingot from recycled material and is projected to be the world's largest aluminum recycling center, according to Novelis.
