NEW YORK Midwest spot
aluminum premiums moved above 9.5 cents per pound in the past
week for the first time in 11 months as consumers were forced
to pay more to secure spot metal amid supply tightness.
Spot premiums rose to between
9.25 and 9.65 cents per pound Thursdaythe highest level
since May 2011from 9 to 9.5 cents a week earlier, with
one trader closing a few atypical deals above the new
Consumer interest rose due to a
decrease in aluminum prices on the London Metal Exchange while
supply remains restricted as the contango on the LME contract
continues to keep metal in LME-registered warehouses.
Traders reported solid demand
for P1020 in recent days as three-month aluminum prices fell to
$2,074.50 per tonne on the LME on Wednesday, down 11.2 percent
from the March high of $2,335 per tonne.
"Theres definitely been
increased interest this past week. Were seeing strength
across the board," one trader told AMM. "Consumers
arent complaining (about rising premiums). The price has
gone down. Theyre happy. They dont care about the
premium as long as the price is the right number."
"Weve seen more interest
this past week for May and June sales," a second trader said.
"I think there will be more business further out. For the first
half of the year, people are pretty well covered."
The lower LME price led some
market participants to draw down stocks from listed warehouses,
with total inventories easing to 5,052,700 tonnes on Thursday
compared from 5,059,075 tonnes a week earlier.
However, more than 2 million
tonnes of primary aluminum continues to be held in
LME-registered warehouses in the United States as the
ever-present contango means traders can continue to turn a
profit simply by storing the metal in warehouses.
On Thursday, the July 12/Sept.
19 spread widened to a contango of $25 per tonne, while the
April 16/July 12 spread widened to $35 per tonne.
The metal tied up in warehousing
deals has left supply tight in the physical market.
"Theres not much metal
being offered from the producers," the second trader said. "And
if it is, its pretty pricey. Even though theres
plenty of metal, its still pretty tight. Its not
going directly to customers, its going to
Even with the increased load-out
rates introduced this monthwarehouses storing more than
900,000 tonnes of metal can now be required to ship as much as
3,000 tonnes per day, up from 1,500 tonnes previouslythis
will not depress premiums, traders said.
"If the metal was going straight
to consumers, it possibly might affect (premiums), but
thats not whats happening. The majority of those
warrants are financed. Load-out rates arent going to
change that dramatically because most of the metal is moving
from warehouse to warehouse," the second trader said.
A third trader agreed, although
he noted that the slight rebound in the LME price on Thursday
to $2,109 per tonne may lead consumers to hold off.
"We did a lot of business for
the balance of this year and next year when the price came off,
but its up now. And if the price keeps going up, people
will sit on the sidelines," the third trader said. "Maybe
weve seen the bottom. The stock market is rallying