Aluminum alloy prices began to head slightly higher this week as key first-quarter buyers entered the market for significant volumes while at the same time scrap prices look set to rise in the winter months and new year.
Market prices for 226 ingot, the key trade of secondary aluminum, have firmed by around Eur30/mt ($32/mt) this week, sources agreed.
"The lowest I heard was around Eur1,580/mt this week and it seems that prices at around Eur1,550/mt delivered have disappeared," a German trader said.
A German alloy producer confirmed he had been offering and selling 226 for delivery during the first quarter at Eur1,615-1,625/mt delivered this week.
He predicted prices would continue to rise as low scrap prices are swiftly disappearing and Q1 demand from diecasters looks set to be strong.
One large automotive maker was in the market for Q1 volumes holding an online auction on Wednesday. Volumes were strong and prices were higher than the last few weeks, market sources said.
"I heard the buyer achieved Eur1,580/mt delivered Germany," said a Polish producer, who said they had offered Eur1,600/mt for delivery to Czech Republic but had not been successful.
A second key diecaster was also in the market this week seeking Q1 supplies. Volumes required were said to be some 2-3% higher than Q1 2015.
Initial bids were around Eur1,600/mt delivered European plant.
Meanwhile, a third buyer also fixed part of his Q1 prices and deliveries this week. "Prices on average were around Eur1,580/mt although I did get one trade offer at Eur1,560/mt but offers since the start of the week have moved up to around Eur1,600/mt after the LME jumped by $30/mt on Wednesday," he said.
Rumors that China had called for the stockpiling of 900,000 mt of aluminum pushed values higher on the LME. This added weight to scrap dealer calls for higher prices. The LME's cash settlement price for aluminum rose to $1,470/mt Wednesday, up from $1,445.50/mt a week earlier on November 19 and was also higher than four weeks ago on October 30 at $1,447/mt.
Platts weekly assessment Friday of standard 226 grade rose Eur30 to Eur1,580-1,630/mt delivered Germany, including 30 days' credit, from Eur1,550-1,610/mt a week earlier.
Spot indications for 231 grade were also higher at at Eur1,630-1,680/mt delivered Germany.
SCRAP PRICES SET TO FIRM
Alloy producer have already noted some higher prices for aluminum scrap, the key ingredient used to produce aluminum alloy, and many fear scrap prices will rise in the winter months.
"The winter is coming and scrap prices will firm," the trader said.
A German alloy producer and scrap buyer also said aluminum scrap prices are likely to firm because many scrap dealers will close for a number of weeks between Christmas and New Year. "Those that have had a good year will just stop selling as they won't want to pay more tax," the German producer said. "And secondly scrap prices are very low so many dealers will prefer to wait till the New Year to sell in the hope of achieving higher prices then."
The Polish producer agreed, saying scrap dealers were showing higher resistance to selling at low prices," the Polish seller said. "The flow of scrap is becoming weaker and weaker...many scrap merchants will shut their yards December 10 until mid-January."
"No-one knows really how scrap prices will evolve...everyone expects scrap prices to rise but they're not sure when," the third diecaster said.
Aluminum turnings are still priced at around Eur850-570/mt delivered, while higher value casting scrap is currently at Eur1,200/mt delivered, sources said.
In other news, Befesa produced 38,609 mt of secondary aluminum alloys in Q3 of 2015, up 32% year on year, while output for the first nine months of the year was up 35% at 129,725 mt, the Spanish recycler said Wednesday.
The sharp increase from 2014 levels follows the startup of the company's new secondary aluminum plant in Bernburg, Germany, which began operating in December 2014.
The ramp-up of the plant is on track, with 75% of capacity loaded in 2015, Befesa said.
