London 05/02/2015 - Primary foundry alloy premiums have fallen below $800 this month in Europe due to a softer euro and weak spot demand as well as falling premiums for aluminium ingots and billets.
Spot premiums for wheel alloy silicon 7 were last quoted at $750-790 per tonne delivered and duty paid over LME cash prices with 30-day payment terms, down as high as $850 a month ago. The rates were also lower than premiums for 2015 annual contracts, which are widely believed to have been booked at $850-900.
For wheel alloy silicon 11, the upcharge on premiums was last at $20-25 on the silicon 7 premium.
"Premiums are definitely under pressure," a Europe-based trader said, highlighting the limited interest in the quiet spot market.
A clear picture has yet to emerge in premiums of both foundry alloys and primary ingots given sluggish demand - in the latter, rates were last around $460 per tonne on a duty-paid in-warehouse basis in Rotterdam, down five percent from $485 at the start of the year.
"I think [the fall in premiums] is more about demand... also premiums for P1020, billets and others have all come down," a second trader in London said.
A weaker euro was another key factor - most producers offer settlement in the single currency, which has fallen around eight percent against the dollar over the past month, which equates to lower rates when converted into the dollar, several sources noted.
"I don't think demand is fundamentally week - I hope demand will pick up in February, which is traditionally better than January, and with he ECB's QE in place, production in the automotive sector should improve," a producing source in Europe said.
Wheel alloys account for 50 percent of the foundry alloy market; the silicon 7 material represents 85 percent of the wheel alloy market.
(Editing by Mark Shaw)