CHICAGO Demand for
aluminum billet has improved modestly in the run-up to spring,
according to market sources.
Some players in the North
American billet market said the increased activity appears to
be the result of customers looking to lock-in material at low
prices on the London Metal Exchange, where cash aluminum prices
have held below the symbolic $2,000-per-tonne mark for four
Others chalked up brisker
business to improving demand across a number of major end-use
segments, from building and construction to the recreational
vehicle (RV) sector.
"The curtainwall guys are going
nuts right now," one billet producer said. Curtainwall, often
made from aluminum, is used to frame glass on the outside of
buildings. While the building and construction industry overall
might be far from robust, certain sectors of it are "coming out
of the basement," the producer said.
U.S. construction spending in
January came in at $883.3 billion at a seasonally adjusted
annual rate, off 2.1 percent from revised December 2012
estimates but up 7.1 percent from January 2012 levels,
according to U.S. government data.
The aluminum billet producer
said orders are also good from the transportation sector,
especially for truck trailers, rail cars and RVs. Improvement
in all three sectors is largely a result of aging vehicles
being replaced, he said.
A consumer agreed that business
was improving. "Were ahead of last year. But we could
stand to take a little more than were getting right now,"
The marine and RV sectors have
been solid, especially in North America, he said. But he
questioned whether producers are booked as solidly as they
might be telling their customers, pointing to
weaker-than-expected demand in China, continued stagnation in
Europe and additional aluminum production capacity coming
online in the Middle East.
If producers werent
talking up the market toward the end of the year during
contract talks, they were at least overly optimistic in their
projections for 2013, the consumer contended. "Our suppliers in
this area arent overly busy," he said.
Meanwhile, some said low prices
on the LME might also be boosting billet demand. On March 1,
cash aluminum settled at $1914.50 per tonne, down 5.4 percent
week over week. At those prices, some would-be buyers may be
coming in off the sidelines, sources said.
The first producer, however,
said his company had been largely unaffected by steep price
drops on the LME, except when it comes to procuring scrap.
Because his firm links its scrap purchases to LME prices, scrap
suppliers have been "reluctant to sell" until LME prices
improve, he said.
Many market players agreed
demand was on the rise, but the modest uptick has not been
enough to increase premiums, with AMMs billet
premium holding steady at 12 to 13 cents per pound this past
Some market sources had
previously speculated that billet premiums might ease as a
result of workers at Alcoa Inc.s majority-owned
Aluminerie de Bécancour Inc. (ABI) smelter agreeing to a
new labor contract (
amm.com, Feb. 22). But others countered that the
facility was still producing off-grade material with higher
iron content and might not be up and running at full speed for
several more weeks, lending the premiums some continued
If that continues, billet
supplies could be constrained, a second producer source agreed.
"You can avoid them for a couple of weeks, but after that, you
are going to need them," he said of the 400,000-tonne-per-year
But others wrote off such talk.
ABI has been a "complete non-factor," a third producer said,
arguing that anyone who had anticipated a production disruption
already built modest inventories to compensate for the
A fourth producer suggested he was almost disappointed by
the a deal being reached at ABI. "I was hoping for a strike and
an uptick (in billet premiums). But now Im afraid I might
get the opposite, a downtick," he said.