NEW YORK Midwest spot
market aluminum premiums grazed a record high this past week as
supply remained tight and traders continued to finance metal in
Midwest spot premiums rose to a
wider 9.75- to 10.5-cent-per-pound range from 9.75 to 10.25
cents a week earlier, with a number of traders reporting sales
as high as 11 cents per pound for immediate deliveries.
"I definitely wouldnt sell
under 10 (cents) right now," one trader told AMM.
Suppliers attributed the
continued run-up mostly to supply constraints. "Its
tight. Its very, very tight," a second trader said.
A third trader agreed, noting
that while his business logged a slight slowdown in the first
week of May vs. the prior week, supply remains tight enough to
keep premiums firm.
"We havent seen that much
activity this past week as the previous week. Its
probably because consumers were finalizing May orders before
the month started. But it seems like theres a shortage of
metal in certain regions," the third trader said.
Others, however, denied that
demand appeared to have taken a step back in recent days.
"Business is stable. Were
in the peak season. Orders are pretty good, Im not
complaining," the second trader said.
A producer source agreed. "The
market is supported by the LME (London Metal Exchange) spreads
and limited supply, thats true. But its also
supported by strong demand," the producer said. "Its not
like earlier in the year, when it was artificially tight. Now
were also seeing demand, which is creating something of a
The North American extrusion
sector, in particular, is said to be experiencing a demand
rebound, with several extruders ramping up output schedules to
meet customers demands. AACOA Inc., for example, has
initiated a 24/7 production schedule (AMM, May 2),
while Lippert Components Inc., a unit of Drew Industries Inc.,
is in the process of ramping up three extrusion presses at its
new facility (AMM, May 3).
At the same time, traders
continue to finance metal in warehouses as the forward curve
allows. Although participants drew more stocks from LME-listed
warehouses this weekglobal inventories slipped to 5
million tonnes on May 2 from 5.1 million tonnes a day
earlierthat material is simply said to have been
refinanced in non-LME listed warehouses, keeping the supply
This warehousing trend is likely
to continue, provided the contango remains in effect, sources
said. The May 16/June 20 spread widened Friday to a contango of
$16.50 per tonne, while the July 18/Sept. 19 spread widened to
$25.50 per tonne, according to LME data.
"(Consumers) are competing with
the LME warehouses. So long as banks are happy to hold metal
and finance it against the contango, metal will continue to be
put away," the second trader said.
In addition, sources report an
increase in North American material being exported to Asia,
squeezing markets further.
Traders say Japan is buying more
North American metal after curtailments in Australian capacity.
Norsk Hydro ASA cut one-third of its 180,000-tonne-per-year
capacity at its Kurri Kurri smelter in New South Wales and is
contemplating permanently shutting the smelter due to an
uncertain market outlook, weak aluminum prices, a strong
Australian dollar and high carbon tax (AMM, Feb.
Kurri Kurri sends a significant
volume of metal to Asia, sources said, so Asian markets are
already feeling the pinch, with some Japanese traders said to
be ordering North American material from the West Coast.
"Japan is bidding some big
numbers. So obviously theres some setback there," the
second trader said. "Theres not a lot of metal coming
from Australia, and Russian material continues to be financed
in warehouses in Europe."
"Japan . . . is
drawing some units away from the West Coast," the first trader
agreed. "Thats material that would normally come back to