Physical prices of 226 ingot, the key grade of secondary aluminum in Europe, continued to move up last week, breaking the psychological barrier of Eur1,800/mt ($1,901/mt) delivered.
Spot market prices began the week at Eur1,780/mt delivered, rising toward the end of last week to Eur1,800-Eur1,850/mt delivered.
The S&P Global Platts weekly assessment of standard 226 grade rose by Eur40 at the bottom end and Eur50 at the top end to Eur1,780-1,850/mt delivered Germany, plus credit, from Eur1,740-Eur1,800/mt in the week ended February 17.
Prices for 231 alloy also rose Eur40-Eur50 to Eur1,830-1,880/mt delivered Germany, plus credit.
Offers of primary aluminum alloy AlSi7 market premiums were steady at Eur355-Eur360/mt over LME cash, delivered plus credit.
"Buyers who were targeting prices below Eur1,800/mt were surprised...I did not expect prices to go so fast, but the change was big and sudden," said a Polish producer.
A Spanish seller agreed, saying that all indexes such as primary aluminum and copper on the LME were up again. "High demand combined with less availability has offered the perfect cocktail for prices to explode," he said adding that toward the end of last week he was selling at Eur1,850/mt and that Eur1,900/mt would be the next target.
Meanwhile, a trader said that offers at Eur1,820/mt delivered were rejected, but he had found it difficult to purchase at Eur1,770/mt delivered.
He had also been offered UK 226 ingot at GBP1,500/mt ex-works, which equates to Eur1,740/mt ex-works or around Eur1,790-Eur1,800/mt delivered Germany.
Buyers, sensing that the market has leaped over the past couple of weeks, have been keen to lock in volumes and as a consequence sales were extremely brisk last week.
A number of key quarterly buyers were firming up volumes for second-quarter delivery and monthly buyers were also in the market seeking April/May quantities. In addition to this, sellers reported a high number of buyers seeking very prompt deliveries.
"Demand is very good and we hear some producers have problems to deliver on time so we've been asked a lot this week for quick deliveries," said the Polish producer. She said most sales were done at Eur1,830-Eur1,840/mt delivered and that she expected prices to reach Eur1,900/mt delivered by the end of March.
SCRAP, NASAAC REASON FOR HIGHER INGOT
Lack of scrap has continued to be the main force behind producers' calls for higher 226 ingot prices. Many scrap buyers, faced with high prices over the past few weeks, have held off purchasing in the hope that prices would ease, the Polish alloy producer said, but they have done the opposite, she said.
Non-delivery by some sellers was a general theme last week also as sellers who sold 226 at Eur1,520-Eur1,530/mt delivered are now faced with much higher scrap costs.
A number of producers said they had picked up very prompt orders from buyers and traders who needed material quickly possibly because of non-delivery against Q1 contracts.
"Scrap metal prices are at an average of around Eur1,400/mt delivered," the Spanish producer said.
In Poland, mixed turnings were reported on offer at Eur1,170-1,200/mt delivered and old cast was at Eur1,300-1,320/mt delivered. Mixed turnings in Germany were heard at Eur1,150/mt delivered.
Scrap dealers watch the LME's primary aluminum price for direction, and so far in 2017, the cash settlement price has risen $207 since the first 2017 official cash settlement price of $1,702/mt on January 3.
The LME's primary aluminum official cash settlement was $1,909/mt March 3, up $32 from $1,877/mt a week earlier and over $100 higher than $1,808.50/mt four weeks earlier.
Strong demand has been met by tighter supply caused by higher-than-normal exports to the NASAAC contract in the US, sources said. The NASAAC is the LME's US A380 aluminum alloy contract.
Sales to the NASAAC have been done at around $1,950/mt, which is the equivalent of Eur1,848/mt and is some Eur70 above the March 3 226 physical price.
Selling to the NASAAC has opened up sales opportunities for LME-registered European producers at a time when market prices in Europe at the end of 2016 were languishing at around Eur1,600/mt delivered.
Shipping costs of around $95/mt are often cut by incentives of around $45 offered by warehouses to attract metal.
The NASAAC has risen significantly since the start of 2017. The LME's NASAAC three-months official settlement price was $1,965/mt Friday, up $200 from $1,765/mt on January 3.
