OREANDA-NEWS. May 14, 2015. A number of key buyers agreed to pay higher prices for their third-quarter aluminum alloy supplies after negotiations kicked off this week in Europe.

"We got all the Q3 quantities that we needed right now but prices were some Eur50-60/mt higher," said a European die-caster. Buyers fixed Q2 volumes for 226, the key grade of aluminum alloy, in March at either side of Eur1,900/mt delivered plus credit.

Aluminum

Demand was said to be exceptionally strong for Q3 delivery as Europe's car industry continues to grow. "Inquiries for Q3 have been huge. We saw very big volumes on a level with Q2," said an Eastern European supplier.

Third-quarter demand is usually slightly lower than Q2 because of the slower summer months but this year has been exceptional, market sources said. Market prices for 226 have strengthened significantly by around Eur300/mt over the past three months on the back of increasing demand.

Spot prices for 226 were relatively wide-ranging this week with some buyers securing as low as Eur2,060-2,080/mt delivered Germany plus credit with others paying up to Eur2,120-2,150/mt delivered. European alloy producers have been pushing to achieve market prices of above Eur2,100/mt based on tighter availability and rising scrap input costs.

"Some buyers still say they can purchase at Eur2,040/mt via a trader but to get good volumes you have to pay Eur2,100/mt," she said. Sales at above Eur2,100/mt were becoming more numerous as die-casters, in need of material, were forced to pay up.

"I sold 100 mt of 226 at Eur2,120/mt for June and July delivery this week as well as some volumes at Eur2,070/mt," said a trader, who added that the minimum sales price he heard this week was at Eur2,060/mt. The pace of the price hikes was however thought to be diminishing this week with many sellers calling for prices to consolidate at this level.

"It's better for the market to consolidate now and stay firm and stable" rather than overheat and come crashing down, said the Italian supplier. The Platts weekly assessment Friday of standard 226 grade spot rose by Eur10 to Eur2,060-2,130/mt delivered Germany, including 30 days' credit, up from Eur2,050-2,120/mt previously. Spot indications for 231 grade were also Eur10 higher at Eur2,110-2,160/mt delivered Germany.

Strong car sales

Car sales in Western Europe grew by 6.7% in April to 1.124 million units, up from 1.053 million in April 2014, said LMC Automotive's analyst Jonathon Poskitt Thursday. Year-to-date sales were also up by 8.2% at 4.523 million units from 4.180 million in January to April 2014.

"The economy continues to improve, helped by strong real wage growth and an eight-year high measure of European sentiment.

We have slightly raised our forecast for 2015 to 12.9 million units, a 6.6% increase on last year," said Poskitt. With the German economy gaining momentum in the early months of 2015, car sales in April rose 6.3% to 291,395 units and registered a 6.4% growth in year-to-date sales of 1.049 million units.

"As with preceding months, this growth continues to be led by company car sales, which were up almost 11% year-to-date. Private car sales, however, were down 1.2% in the same period," Poskitt said. Demand for new cars in the UK gained strongly in April, historically a trend in the run up to the general election.

April statistics showed a 5.1% gain to 185,778 units and year-to-date growth of 6.4% to 920,366 units. In Spain, car market growth slowed in April following the end of the latest government scrappage scheme, although year-to-date growth of circa 24% to 349,849 units shows the recovery is still very much on track.

The Italian car market recorded its fourth consecutive month of double-digit growth, due to consumer confidence improving from the start of the year, said Poskitt.

Car sales were up 24.2% in April at 148,807 units and year-to-date showed a 15.9% gain to 576,665 units. In France, April car sales were up 2.3% at 170,768 units with year-to-date registering a 5.5% gain to 647,294 units, as consumers continued to receive a boost from low energy prices and rising employment.