NEW YORK Midwest spot
aluminum premiums have surpassed 10 cents per pound for the
first time in almost a decade, with traders reporting decent
demand as the London Metal Exchange price of aluminum continues
Midwest spot premiums rose to
9.75 to 10.25 cents per pound this week from 9.25 to 9.65 cents
previously, with several suppliers achieving 11 cents
for immediate deliveries.
If demand stays strong and
supply stays tight, sources say the premium has nowhere to go
"Every hour we have a new deal.
I just closed one this morning," one trader told
"Were pretty tight right
now, but we have a few smelters with extra bits and pieces, and
the last spot deal we closed was at 10.25 (cents). Ive
heard that a lot of transactions have been over 10 (cents),"
one producer said.
"Were expecting premiums
to keep going up," a second trader added.
Traders and producers reported
solid consumer interest this week as the LME aluminum price
continued to slide. Three-month aluminum closed at $2,057 per
tonne (93.3 cents per pound) Thursday, down 0.6 percent from
$2,069 per tonne (93.9 cents per pound) a day earlier and down
3.2 percent from an April high of $2,125 per tonne (96.4 cents
"The dropping price is
definitely a factor. Most people came in the last dip and
bought for the second quarter, so now were seeing that
interest push a little further out," a third trader said.
"Theres been more
activity, absolutely," the producer agreed. "When you see the
price drop, youll often see more consumers coming in to
Participants arent sure
how much lower the price will go, and while depressed prices
are good for consumers and traders, producers are feeling the
"Throw the crystal ball out the
window; I have no idea how low it will go," the first trader
said. "I think its too low, (but) its keeping
things going for sure. Im just glad Im not a
producer. When prices are high, youre the king of the
worldand vice versa when theyre low."
The high premiums have led
traders to sell directly to consumers rather than storing their
material in warehouses, participants said.
"Warehouses are offering very
strong incentives, but if were able to get the premium we
want, well sell to customers. Right now, with premiums at
these levels, its better to sell at the premium than sell
to the warehouse," the producer said.
"If the demand is there and the
premiums are high, I guess it makes more sense to sell it
rather than finance it," the third trader agreed.
Participants drew down more
stocks from global LME-listed warehouses this week, as
inventories dipped to 5.06 million tonnes on Thursday from 5.07
million tonnes a day earlier.
But traders are still financing
metal, keeping supply in check. On Thursday, there were still
more than 2 million tonnes of primary aluminum stored in U.S.
warehouses, according to LME data, and sources say that with
the ever-present contango in effect the situation wont
change anytime soon.
On Thursday, the May 16/July 18
spread widened to a contango of $27.75 per tonne, while the
July 19/Dec. 19 spread widened to $56.50 per tonne, according
to LME data.
"Theres still a lot of
financing going on. I dont think spot is necessarily (so)
robust that everything is pulling out and going directly to the
customer. Theres still metal moving from warehouses going
to other financing deals as opposed to consumption," the third
"Warehouses are still sucking
down a ton of metal," the second trader agreed.