Aluminium deals delayed in Europe by cautious buyers amid weak demand

Industrial customers for aluminium in Europe are delaying providing smelters with volumes for new contracts in 2024 on concerns they may overbuy as demand for finished metal products in the region has slumped in recent months.

Suppliers and consumers are in the middle of the market’s “mating season,” when companies seek to lock in supply deals for the lightweight metal used in transport, construction and packaging.

“Everyone is hand-to-mouth, there’s destocking along the supply chain and people are worried about over-committing,” one representative of a producer seeking deals said on the sidelines of the Fastmarkets aluminium conference in Barcelona this week.

He said many customers were waiting until November before giving final tonnages for contracts as they monitor the gloomy economic situation in Europe.

Industrial production in Germany, Europe’s biggest economy, fell by more than expected in July while the decline in euro zone business activity accelerated faster than initially thought last month.

Some customers of ZED Trading in the United Arab Emirates were postponing shipments of agreed deals because of the soft demand environment, said Ameera Abdulaziz, a trader at ZED.

Some shipments of alumina to the Middle East and aluminium to Europe originally scheduled for June and July had been moved forward to August and September, she said.

BNP Paribas analyst David Wilson said slumping premiums for aluminium billets were a good reflection of the demand for aluminium demand from end-users.

“These are at rock bottom. It’s difficult to see any imminent improvement in European demand,” he said.

“Demand has slowed across Europe, across all end-use sectors.”

The premium for aluminium billets in northern Germany over the benchmark price has plummeted by about $1,000 over the past 18 months to $500 a metric ton, according to Fastmarkets.

Double-edged sword

Greece’s Alumil, a maker of aluminium windows and other industrial products, has been warned by some of its customers that orders may decline by 25%-30% for the first half of next year.

But the family-owned company is also benefiting from the weak demand environment when it goes on the market to buy billets, said Alumil’s Procurement Manager Sotiris Voulgarakis.

“It’s a buyers paradise. If I send out a tender, I’ll get quotes within minutes. They say don’t worry about the price, we’ll work something out.”

Other regions are doing better.

A buyer in the United States said overall demand there was steady, with the aerospace and auto sectors firm while industrial and packaging sectors were soft.

Consumption in the world’s biggest market China has been better than expected, confounding forecasts of weakness as the country struggles to revive its economy, said a trader based in Switzerland who works with Chinese companies.

“It’s extremely strong in China, helping to offset some of the weakness elsewhere in the world,” the trader said, citing the booming electric vehicle sector.

Within the depressed construction sector, the government is helping companies complete delayed housing projects, which is also supporting demand, he added. [Reuters]

FILE PHOTO: Aluminium blocks are seen in Wagner Automotiv industry in Gradacac, Bosnia and Herzegovina February 8, 2022. REUTERS/Dado Ruvic/Illustration/File Photo