EU: Aluminum demand declines resulting in delayed industrial contracts

In Europe, industrial aluminum demand is down, causing delays in 2024 supply contracts with smelters. Overbuying concerns are prevalent due to reduced demand for finished metal products. Companies, especially in construction, transport, and packaging sectors, are cautious during this "mating season" for aluminum supply agreements. Supply chain destocking is occurring, and final contract decisions are expected by November, influenced by the challenging European economic outlook.

Germany, Europe's largest economy, witnessed a larger-than-anticipated drop in its industrial production in July. Eurozone business activity also experienced a sharper decline.

Alumina to the Middle East and aluminum to Europe, originally scheduled for June-July, are now pushed to August-September.

Aluminum billet premiums reflect sluggish demand in Europe, with no signs of immediate recovery. Billet premiums have dropped by $1,000 in the past 18 months, and are currently at $500/t.

Alumil, a Greek aluminum manufacturer, is bracing for a significant 25%-30% drop in orders due to sluggish demand. However, they find solace in advantageous billet purchasing conditions. Meanwhile, the US continues to see stable aluminum demand, with the aerospace and automotive industries driving growth, though the industrial and packaging sectors are encountering challenges.

In contrast, China, the world's largest aluminum market, has surprised analysts with its strong demand, defying earlier expectations of an economic downturn. This unexpected resilience is attributed to the booming electric vehicle sector and government-backed housing projects. A Swiss trader, who regularly interacts with Chinese companies, has confirmed this surprising trend.

So, while Alumil navigates a challenging demand environment in Greece, the US enjoys sector-specific strength, and China's aluminum demand remains stronger than anticipated.