Weak European 226 aluminum prices weigh on Japanese market: traders

Tokyo — The widening gap between the European and Asian spot secondary auto-grade aluminum alloy prices continues to weigh on the Japanese market, trade sources said on Tuesday.

The European 226 alloy prices were last assessed at Eur 1,400-Eur 1,450 ($1,600-$1,660)/mt delivered on October 19, the lowest since S&P Global Platts assessment started in 2014.

Offer levels heard in Japan this week for Chinese, Korean and Malaysian ADC12 alloys were $100-$200/mt higher, at $1,750-$1,850/mt CIF Japan. Asian ADC12 and European DIN226 are alloys with similar specifications, used for engine and other automotive components.

European producers were heard offering ADC12 aluminum alloys at $1,740/mt CIF Japan for December loading this week to prospective Japanese buyers.

They were not offering any spot cargoes to Japan during the January-August period of this year, when prices were generally $70/mt higher in Europe than in Asia.

There is room for European prices to drop, as the market there remains weak, sources said.

In addition, due to the upcoming Christmas holiday season, the European alloy needs to load in the first half of December, adding more pressure on prices.

"Normally, they offer 200-300 mt volumes, but they are coming out with 500-700 mt [lot sizes]. I have not seen such large volumes from Europe," one trader said.

So far, offers for Spanish ADC12 metal at $1,740/mt CIF Japan have not attracted any buying interest.

A second Japanese trader said the uncertain price outlook was another factor discouraging buyers.

"It takes longer for European metal to arrive. It is difficult to see where prices will be in a month from now," the second Japanese trader said .

Chinese aluminum alloy prices may not track the fall in European prices as producers appeared to be sold out for December, the traders said. Most Chinese producers were offering January shipment cargoes.

Malaysia-origin cargoes was heard offered higher at $1,770/mt CIF Japan, and South Korean metal was indicated at $1,850/mt CIF Japan.

"Spot domestic Korean prices are high reflecting the recent automotive tender result and there is no need to sell to Japan," a third trader said.

Japanese demand outlook is positive as there are stable order volumes from regular spot buyers, but traders said they were not sure if Japanese demand was strong enough to absorb excess European supplies.

--Mayumi Watanabe, mayumi.watanabe@spglobal.com

--Edited by Liz Thang, elizabeth.thang@spglobal.com