NEW YORK Warrant premiums
for aluminum in London Metal Exchange-registered U.S.
warehouses have been rising, and traders tell
AMM they see little on the horizon to keep them from
continuing to climb.
"Theres the contango, the
availability," said one trader who put premiums at $135 per
Warrant premiums for metal in
warehouses in Baltimore, Chicago and New Orleans have climbed
to an average of $132.50 per tonne, with traders reporting a
low of $120 and a high of $140 for the much-desired warrants.
They previously had averaged around $107.50 per tonne, with a
low of $95 and a high of $125. "If I saw them for less,
Id buy them all day long," the trader said.
The aluminum supply is tied up
due to long queues to pull material out of LME-registered
warehouses in Detroit, traders have told AMM. In
April, Midwest spot aluminum premiums rose above 10 cents per
pound for the first time in almost 10 years (AMM,
"We have a bottleneck
situation," a second trader said. "Everybodys trying to
move product out of (Detroit). Its much more difficult
over the past two weeks."
Warrants for material in Detroit
are next to impossible to find, traders said. Of 2.2 million
tonnes of stocks in LME-registered warehouses in the United
States on April 26, 1.4 million tonnes were in Detroit. Waits
for pulling metal out there are at a minimum of eight months,
traders have told AMM.
Meanwhile, the spread between
the price of spot aluminum and three-month material means
theres a profit to be made simply by holding
"Youd need to see a
tightness of the LME spread, or any type of crisis in the
financial markets . . . that could destabilize the
situation," the second trader said. Without that, theres
no end in sight to the climbing premiums.
Cash aluminum settled at $2,058
per tonne in official trading Monday, while three-month
aluminum settled at $2,098 per tonne.
Meanwhile, traders reported a
lack of activity on warrant prices for other nonferrous
Warrants for copper, which has
slipped into a backwardation on the LME, have failed to see any
change. Cash copper settled at $8,529.50 per tonne Monday and
the three-month contract settled at $8,377 per tonne, and
traders said premiums for copper warrants were unchanged at $5
to $10 per tonne.
"(The backwardation) should mean
that premiums would come down because it costs you so much to
carry, (but) we havent seen that," the first trader
"Theres very little demand
for (material) here, and there are queues to get the material,"
a third trader said. "The only thing thats screwy is the
copper situation on the LME. Thats just somebody playing
Warrant premiums for zinc and
lead also were unchanged at $16.25 per tonne and $21.25 per