BRAZIL ALUMINIUM SNAPSHOT: Currency devaluation weighs on the domestic market

Key data from the September 24 pricing session.

P1020A ingot delivered São Paulo region ($ per tonne)

P1020A ingot on a cif Brazilian ports basis ($ per tonne)

Aluminium extrusion billet 6063 and 6060 on a cif Brazilian ports basis ($ per tonne)

Key drivers

• The currency rate has been adding significant pressure to the local market. The dollar reached record high levels against the Brazilian Real this week, and analysts foresee further strengthening. In the year to date, it has already increased by nearly 60%.
• Uncertainties over the currency have led some to bring forward purchases of primary metal, for fear that the Real may be devalued further in the short term. However, many remain mostly out of the market, with cash flow constraints and weak end-user demand leading to “hand-to-mouth” purchases.
• Domestic premiums for ingot delivered to the São Paulo region remained stable in the week, considering a 100-tonnes lot size.
• For larger volumes (+2,000 tonnes), there are reports of negotiations being conducted at a level of $180-200 per tonne premium.
• Premiums for ingot and extrusion billet sold into the country on a cif Brazil basis have fallen from the previous assessment, affected by the international environment.

Key quotes
“We anticipate about 90% of our October purchases will happen in September, as we believe the dollar will continue strengthening. Margins are really, really tight now and, with the currency at this new rate, it will be much harder. I don’t think that many will survive in this market in the short to medium term.” – Buyer

“We have made a few offers, but it has been really hard to sell, especially given the uncertainties over the currency. Nobody knows what tomorrow will bring, so how can one plan what they will be buying or when?” – Seller

“It is a buyer’s market. There is plenty of metal in stock in Brazil and one can import aluminium with attractive premiums and much better financing conditions abroad. So domestic premiums have to be competitive.” – Buyer

Trade log

• 500 tonnes of aluminium ingot sold on a cif Brazil basis at $180 per tonne premium.
• 150 tonnes of aluminium ingot delivered to the south-east region sold at $380 per tonne premium.
• 400 tonnes of extrusion billet delivered to the south-east region sold at $600 per tonne premium.

For previous 2015 aluminium trade logs, please click on the relevant month:
January
February
March
April
May
June
July
August

Click here for Metal Bulletin’s P1020A ingot delivered São Paulo region premium specifications.
Click here for Metal Bulletin’s P1020A ingot sold on a cif Brazilian ports basis premium specifications.
Click here for Metal Bulletin’s new aluminium 6063 & 6060 extrusion billet sold on a cif Brazilian ports basis premium specifications.

Danielle Assalve 
danielle.assalve@metalbulletin.com
Twitter: @dassalve_MB