The final stretch of the year presents us with a decrease in the demand for billet in the European spot market. However, there are a series of variables that are slowing down the fall and maintaining some stability in the market. This is due to multiple factors that we will analyse below.
Reasons for the decline in aluminium demand
On the one hand, we will look at the reasons for the drop in demand.
- Extrusion plants have accumulated stock during the year, so they maintain high levels of billet inventory.
- LME prices are showing an accelerated decline which has a direct influence on the cost of billet production.
- Manufacturing activity is declining sharply due to lack of some supplies, logistical costs and energy costs, leading to a decrease in demand for raw materials.
- Russia has eliminated export taxes, which marks an attractive horizon for negotiation.
On the other hand, the factors that are sustaining the market are the following:
- Logistical problems: The container and freight crisis is delaying shipments of this product that have already been agreed and are also beginning to suffer the consequences in land transport.
- Suppliers are reducing supply as the energy crisis has caused production costs to soar, which has even led to production cuts in some European plants, especially in those countries with high energy bills.
- Supplies of other metals that are necessary for the production of certain aluminium alloys are also experiencing supply problems, such as magnesium and silicon. To cope with these magnesium and silicon supply problems, smelters will be forced to increase consumption of materials with high magnesium and silicon content: wheels (aluminium with 13% silicon), aluminium 5000 series alloys for magnesium and car steering wheels made with magnesium to aluminium. Magnesium-rich wheels are also available.
- End of the EU-US tariff war on steel and aluminium.