London 16/05/2014 - Primary foundry alloy premiums have increased sharply in Europe to top the $800-per-tonne mark amid a recovery in automotive demand, sources told Fastmarkets.
Premiums for wheel alloy silicon 7 were last quoted at $790-830 per tonne delivered duty paid on top of LME cash prices with 30-day payment terms, up from 730-770 last month.
Sales for much later in the year were reported as high as $835 with no deal below $800 booked from July onwards for the product used by wheel producers and ultimately by car companies.
"Wheel producers are seeing rampant business - some are considering not to shut down over the summer because they have too many orders," a foundry alloy supplier said.
Strong demand was seen in countries like Germany and Poland, with some short-covering reported across Europe.
Annual contracts for 2014 were settled around $625 per tonne compared with $550 for 2013, sources had told Fastmarkets late last year.
Not only car sales in Europe are recovering but the use of aluminium in vehicles (instead of steel) is also growing.
Wheel alloys account for 50 percent of the foundry alloy market - the silicon 7 material represents 85 percent of the wheel alloy market.
Sales of new cars in the European Union rose 4.6 percent in April compared with the same month a year earlier, recent figures from the European Automobile Manufacturer's Association (ACEA) showed. This was eighth consecutive monthly increase.