In part one of Stuart Burns’ piece on the aluminum extrusion market, he explained how the LME price’s stagnation is affecting the markets. Here he examines the big players in large bar production and consumption, Germany and Russia.
The key to the issue of big press capacity is probably a combination of German and Russian demand. Germany’s large section extrusion demand, driven by its robust and massive engineering sector, is probably close to half of Europe’s total aluminum large bar market. Exports of German-manufactured goods have remained strong, aided by a benignly weak Euro and robust emerging market demand.
Although Russia has been slowing, and some have raised the fear it may even slip into recession if the oil price weakens, it has still generated solid domestic metals demand, a significant portion of Europe’s big bar and section market is supplied from large Soviet-era Russian extrusion presses and mills there have been balancing domestic with export (read Western European) demand.
As a result, the market, at least for large aluminum sections, has become progressively tighter and premiums have come under pressure. Perversely, at the same time and as if to highlight the differing dynamics of the two sectors, smaller bars and sections below 10 inches continue to face weakness and oversupply.
Italian producers in particular have been selling at price levels considerably below levels they would have entertained two years ago relative to the rest of the market, simply to keep presses active in the absence of domestic demand.
Imports from just about every corner of the world have added pressure to the situation. Most emerging markets have extrusion presses capable of producing small-to-medium-sized extrusions, the technology is simple and the capital expenditure is modest compared to large presses, so competition is rife.
The market has not been this polarized since the strong rebound seen in extrusions during 2010-11. Much will depend on industrial output during the second half of this year as to whether it drags the middle of the market for 100 to 250-millimeter (4-10 inch) diameter sections with it later in the year or it remains a big bar feature. A slowing industrial sector will see demand ease across the board but for the time being Germany, at least, appears to be leading from the front.