European Aluminium Market for Rolled and Extruded Products

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Non-ferrous Metals

The aluminum semis market in Europe is still in the doldrums according to reports we are hearing from the market place. Mills have tried introducing modest price increases in the third quarter but with demand still not picking up the increases have been accepted only in some areas. Automotive demand has picked up due to scrap schemes but in itself that is not enough to materially move the automotive market, particularly as many of the schemes encourage small car purchases. So while unit volumes are up, total tonnage is down. As schemes are phased out so will the rise in demand. Construction, another big consumer, is still deeply depressed having all but ground to a halt in some commercial markets like the UK and southern Europe. Lead-times for most extruders appear measured in weeks, typically 1-2 weeks, rather than the 1-2 months of early 2008.

Markets like the UK are facing rising domestic costs due to a weakening pound and higher metal prices feeding through from the late second quarter onwards. Prices are likely to move higher still in early 2010 not due to the LME but the weakening pound/euro exchange rate feeding through into new deliveries.

Flat rolled deliveries have fared much like extrusions. Mills have tried to impose small increases but with limited success. Demand is still weak as the supply chain refuses to re-stock in any meaningful way and yet mills have plenty of capacity available to meet short term demands so even distributors are disinclined to re-stock.

Meanwhile, China is likely to feature as a supplier into Europe again following adjustments to the export rebate scheme. Foil and plate now enjoy a 14% vat export rebate and the duty on profiles (other than bars) has been replaced with a rebate of 11%. Aluminum bars under 65mm diameter are subject to a 5% export duty and over 65 mm to a 15% export duty but that probably won’t bother them as domestic demand is still strong in the bar market. Expect more flat rolled material to make its way onto the world market though in the fourth quarter.

–Stuart Burns

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