Following up yesterday's bad news from Alcoa (NYSE:AA), we learn today that they have lowered their billet premium from 11 cents per pound to 8 ½ cents per pound. This will have a bottom line effect on the total dollar sales for Alcoa. Billet is produced by Alcoa at various smelter locations and is considered a value-added item above the typical smelter output of ingots, sow or T-bars, which carry no premium. Alcoa would have the benefit of making billet directly out of molten smelter metal and getting the usual 11-14 cent premium depending on market conditions. Billet is consumed by extruders who make specific aluminum shapes mostly for building and construction.
Due to poor demand, the premium for the billets - of which we hear they have plenty of stock - had dropped below the Alcoa cost of production, which they say was 11 ½ cents per pound. This is due to the extremely poor demand from the building and construction sectors, as witnessed by the recent Chapter 11 by Indalex and Chapter 7 by Signature Aluminum. Even yesterday Kaiser Aluminum (NASDAQ:KALU) announced further cutbacks at it Virginia facility, where it will focus solely on drive shaft and seamless tube products. The facility will also be temporarily shut down in July in response to the continued weak market conditions.
skip to main |
skip to sidebar
Follow me on twitter www.twitter.com/joshkalter
Followers
Blog Archive
About Me
- Network Metals
- Joshua Kalter (president/owner): Mr. Kalter has over 25 years of experience in trading metals, ores, and alloys in international trading firms. Specifically he has physical trade expertise in non-ferrous metals and has traded on the LME and COMEX. Mr. Kalter has great familiarity with producers and consumers on both the executive and plant levels in the metals, automotive, building and construction, packaging and steel industries. Mr. Kalter has extensive knowledge of the global metals, ores, and alloys transportation and logistics operations, especially the importation of Chinese metals. He has also established detailed hedging, freight, warehousing, and distribution programs for the metal industry. Mr. Kalter consults extensively with a wide array of hedge funds regarding the physical metal markets, and has delivered seminars on various topics. His expertise includes aluminum, copper, nickel, zinc, lead, tin, silicon, magnesium, manganese, chrome, titanium, molybdenum, cobalt, ferroalloys, steel industry raw materials, scrap & recycling, and base metal alloys.