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How the European aluminium distributor market has gone ‘from hero to zero’ during 2023

The last 12 months have proved less-than-vintage ones in terms of demand and premiums for aluminium rolled and extruded products across the “Old Continent”.

In our capacity as rolled and extruded aluminium products distributors here at MCA UK, we naturally take a close interest in the state of the beleaguered European aluminium distributor market, and share what the prospects could be for the months and year to come.

There could scarcely be a greater contrast with the situation of 12 months ago

Low, and reducing demand for European aluminium has been a marked trend of 2023; this time last year, distributors and their supply chain were turning over five times the volume they are handling now.

All the key statistics point to a massively overstocked supply chain and a slowdown in user demand, the latter signalling the emphatic end of any post-pandemic “bounceback”. Higher interest rates have also been a major talking point across the aluminium supply chain this year, causing all stakeholders to be more cost-sensitive in their decision-making.

The recent relative weakness of the automotive sector has played a key role in the lack of demand for aluminium. The car industry is now a big part of the demand picture for aluminium, and there are signs that car production has been down across Europe this year compared to 2022.

Car production in Germany, for example, decreased to 338,800 units in October 2023, compared to the 359,613 units that had been recorded for the previous month, and the average German car production levels of 427,167.66 for the period from 1999 to 2023.

P1020 physical delivery premiums have been a bellwether of weakening demand across the European aluminium distributor market during 2023. As assessed by price reporting agency Fastmarkets, the aluminium P1020A premium, in-warehouse duty paid Rotterdam was at $260 to $280 per tonne as of 1st September, which was already the lowest level since January 2023. This measure then went on to drop further throughout the autumn, and was at $225 per tonne as of 10th October.

A similar story has been the case for 6000 series aluminium alloy extrusions. According to a Fastmarkets assessment, the aluminium 6063 extrusion billet premium, DDP North Germany (Ruhr region) was at $465 to $500 per tonne on 1st September. This represented a 29% drop from the $650 to $700 per tonne that had been recorded during the first month of the year. Subsequent drops during October and November brought this premium to a level around 55% below what it had been 12 months earlier.

High interest rates, sticky inflation, and sluggish recovery prospects – but there could be some reason for optimism

With interest rates and inflation high, it has become much more expensive to hold units. This has increased eagerness to sell at what has undoubtedly been a bearish time for the market.

Indeed, right through the Northern Hemisphere’s spring and summer, there continued to be slowing demand from end users – ominous, given that the warmer months traditionally see strong demand from sectors such as construction.

Many in the market are not expecting to see a real recovery until the second quarter of 2024. Factors such as a higher cost of living and sticky inflation and interest rates have led to a subdued market this year, amid fears that this may linger for some time.

However, Fastmarkets has signalled potential reason for optimism, expressing its expectation of “a surge in year-end seasonal strength and restocking activity within the aluminium market” for the world as a whole. The agency reported this view as a “short-term bullish” one, and said the increase was being “driven by the emergence of attractive price points”, with consumers rushing to obtain metals “amid a rise in restocking activity.”

At MCA, we are sceptical that such a recovery will occur in Europe; rather, our expectation is for a somewhat slower recovery in demand later during the first quarter, characterised by a relatively modest easing of the supply chain’s overstocking position and a reduction in finance costs.

In the meantime, whether you are seeking a trustworthy and leading independent importer and distributor of extruded aluminium round bars, rolled plate, complex extrusions, or other rolled and extruded aluminium products, please do not hesitate to place your trust in MCA UK.