European Aluminium Wire Prices Edge Up Despite Weak Demand

In the week ending April 21, the prices of European Aluminium Wire saw a notable increase due to the mounting premium costs over raw material Aluminium Ingot prices amidst a lack of demand in the electrical power transmission sector. The raw material Aluminium premiums settled at USD 295-325/MT, indicating a 6% rise in the past two weeks and a 16.9% increase since the beginning of the year. Traders have reported that the premiums remain high, despite ample inventories of Aluminium Wire in the spot market, due to elevated production charges. However, freight prices have declined, and the European market is not encountering significant competition from the Asian market, as raw material Aluminium units from the Middle East, India, and other regions are being imported to Europe. The spot market is experiencing a weak demand for Aluminium Wire in April, even from the most reliable end-users. If downstream inquiries of Aluminium Wire increase, the domestic market conditions would be conducive to a swift escalation in premiums. This is because buyers may potentially compete with their Asian counterparts for overseas units.

As per our market sources, Europe's domestic supply of Aluminium Wire has significantly decreased in recent years due to capacity curtailments, with up to half of European production capacity being cut in the past two years as a result of high-energy prices. However, energy prices are now decreasing and hovering at a moderate level. Despite the recent easing of energy prices in Europe, there have been further cutbacks in the domestic market, indicating a shift of primary production to Asia. It is unlikely that a significant portion of the curtailed European capacity of Aluminium Wire will return as it will require high costs for reopening closed smelters. Additionally, Aluminium stock levels in exchange warehouses have surged due to companies like Glencore delivering Russian metal that cannot be sold to end-users. Despite low demand, European Aluminium Wire prices remain higher than in other regions, attracting tonnages from overseas market players despite eased Japanese Aluminium Wire prices and a closed arbitrage window in China.

As a ripple effect, ChemAnalyst predicts that Aluminium Wire prices will rise in the upcoming weeks due to an increase in downstream demand, coupled with low inventories of rolled products due to restocking cycles and import duties on Chinese goods. Furthermore, more than 1 million MT of European capacity will not return, leaving European players reliant on Aluminium Wire from offshore sources. The potential reopening of the arbitrage window and an uptick in demand from China may have significant implications on the pricing of European Aluminium Wire.