European P1020 premium outlooks remain mixed for H2, contingent on demand

Following an aluminum industry event in London, outlooks for the market in the second half of 2024 remain uncertain as participants contend with ongoing freight costs, limited replacement potential, and mixed demand outlooks.

With the underlying fundamentals driving the market largely unchanged, industry outlooks and feedback for the future trajectory of the P1020 Rotterdam premiums have suggested a continuation of bullishness. However, some participants offered more conservative outlooks for the near future, citing poor PMI data and weakness in orders and sentiment across key industries as acting as dark clouds in the European space.

"Demand is not great, people have purchased conservatively for the short, but we have not heard anyone struggling to get metal, even if some sectors like automotive are cautious," said one trader. "We don't expect many [premium] moves in the summer and while the spreads are not good, overall, the aluminum big picture is still bullish."

Similarly focusing on the wider factors driving the Rotterdam market premiums, one south European trader attributed the tighter availability in the Italian market for Ingots as another key contributor. He referred to larger trading housings fulfilling requests across Italy by delivering material (by truck) from Rotterdam, but in turn recognized that this was partially attributable to a variety of wider factors, including the uncertainty over Mexico Tariffs, continued delays in the Red Sea and inflated freight rates.

"There is so much happening across the globe, it has become very difficult to move metal quickly," the trader said.

However, the same trader kept conservative when discussing the potential for higher premiums through Q3 and Q4, suggesting a plateau will occur due to poor demand or due to downstream value-added product (VAP) customers fixing large quantities earlier in the year.

"Most people have stocks and don't want to keep a large amount on the ground," they said. "I think we'll see another $25/mt on the upside, but then stability and consolidation through Q3."

Other sellers remained bullish, citing that the shipping of metal from the Middle East and Asia has faced significant delays. Offers were heard at $350/mt IW Rotterdam and above in the Duty Paid market with anticipation of further increases, despite large volumes of material being delivered into LME warehouses. An emergence in demand for coal-based units was also observed, as some sellers found customers willing to drop carbon requirements to procure units in a tighter-supplied environment. This additional flexibility could ease some tightness in the market, but with the majority of European Aluminum supply being imported, any benefit is still contingent on the ongoing shipping issues in the Red Sea and the increased freight rates.

"Unpaid units are not readily available, as everything from the Middle East is delayed and everything else is duty free and carries the duty paid premium," said a Swiss-based source. "Containers are delayed 4-6 weeks, and everything to be arriving end of April will now arrive at the beginning of June, which means stocks are running low."

The Platts Daily Aluminum Duty Paid in-warehouse Rotterdam Premium was assessed at $330-$350/mt May 20, with a midpoint of $340/mt.

The Platts Daily Aluminum Duty Unpaid in-warehouse Rotterdam Premium was assessed at $250-$270/mt May 20, with a midpoint of $260/mt.

Platts is part of S&P Global Commodity Insights.