Spot trade of 226, the main aluminum alloy grade, was slow this week, with consumers wary of higher prices, and partly because of the shorter working week.
A number of producers have pushed offers of 226 ingot up to around Eur1,700/mt ($2,350/mt) delivered plus credit in the past two weeks on the back of higher LME prices.
"We are pretty well booked for May and June. We are offering at Eur1,700-1,720/mt delivered, and not below," said a German producer.
An Italian producer said he too was offering around Eur1,700/mt delivered, adding the spot market was relatively quiet.
These higher prices have yet to be truly tested as a number of larger buyers have already booked tonnage for second-quarter delivery and most medium-small consumers are booked for May.
"I have fixed all my demand for Q2 already," said a German diecaster who said he had booked 226 ingot at Eur1,630-1,640/mt plus credit.
European secondary aluminum producers raised prices after primary aluminum prices moved higher on the LME. Although aluminum alloy is based on physical market prices, scrap is the key ingredient, and scrap dealers watch primary aluminum on the exchange for direction.
"Aluminum is stable on the LME. It has not fallen below Eur1,300/mt. So, that is one of the reasons why 226 ingot prices have not gone down," a trader said.
The official cash settlement price on the LME Thursday was $1,840.50/mt, little changed from $1,837.00/mt a week earlier and well above $1,682.50/mt on March 27.
"The LME may be trading higher but there is still enough secondary aluminum available in Europe and I do not think the situation will change for the rest of the year as China is not performing as it was expected to do so," said the German diecaster.
In previous years, Asian buyers have bought good quantities of aluminum scrap, but, because of lower than expected growth, European scrap exports have slowed.
Many in the market said it could be difficult for secondary aluminum producers to raise prices significantly ahead of the summer lull in demand unless there was a sudden sharp shortage of 226 and scrap.
The Platts European assessment of standard 226 grade spot prices remained steady this week at Eur1,650-1,710/mt delivered Germany, including 30 days of credit. Spot indications for 231 grade were also flat at Eur1,680-1,740/mt delivered Germany.
SLOWER GROWTH IN EMERGING MARKETS: LMC AUTOMOTIVE
The global light vehicle market was expected to remain in positive territory this year, with growth of 3% to over 87 million units, according to LMC Automotive.
Less positive news is that several emerging markets are underperforming and the outlook for vehicle sales in some previously high growth markets is being downgraded, said LMC Automotive.
"While the US, China and western Europe continue to be likely sources of expansion in 2014, driving our outlook for the year, a number of large and previously dynamic emerging markets have moved from growth to stagnation, or even outright contraction," LMC Automotive managing director Pete Kelly said.
On Europe, LMC Automotive said while western Europe was turning the corner, the same could not be said of eastern Europe.
"We have yet to see a real downturn in Russia, but all of the fundamentals point towards a weaker market this year, with recovery in 2015 now on a knife edge. The waters are further muddied by events in Crimea, which have already led to a reduction by several percentage points in LMC's forecast," LMC Automotive said.
Sales in Turkey, always relatively volatile, plummeted 30% in March, underscoring the effects of political and economic fragility, it said.
"A large decline in the total east European vehicle market is not expected, but downside risks in certain countries within the region are clearly rising," said Carol Thomas, LMC Automotive's Central and Eastern European Analyst.
"By April this year, we had revised all of our forecasts downwards. Of the six emerging markets under consideration [Argentina, Brazil, India, Russia, Thailand and Turkey], only India is currently expected to show any growth in 2014, and even that is exposed to considerable downside risk," the analyst group said.
