NEW YORK Midwest spot
aluminum premiums will rise in the coming weeks, traders and
producers said, anticipating that a further decline in London
Metal Exchange prices will boost business.
Spot premiums are firm at
historic highs of 10 to 11 cents per pound even as spot
business slowed due to a two-day closure of the LME for a U.K.
But players see inquiries
picking up with an anticipated slide in aluminum prices.
"Theres been some
interest, but people expect the price will go down further, so
theyll wait until then to come in," one trader said.
Three-month aluminum ended the
official session on the LME at $1,973.50 per tonne Friday, down
from $1,985 per tonne on Wednesday. Prices have been steadily
declining from a Feb. 28 high of $2,349 per tonne, when
concerns over the European debt crisis spooked investors.
"It was a quiet week with the
London holiday and the Queens Jubilee," one producer
said, adding that traders will likely see more inquiries as the
price of metal continues to drop.
Consumers, traders and producers
all reported spot deals above 10 cents over the past week, with
a second trader achieving 11.5 cents per pound for a few
uncharacteristic deals, he told AMM.
The premium of "10 cents is
holding very nicely. If someone wants metal tomorrow, you can
ask whatever you want," the first trader said.
Although inventories are
decliningon Friday, global aluminum stocks held in
LME-registered warehouses totaled 4.86 million tonnes, down
from 4.9 million tonnes on Wednesdaythe metal isnt
reaching the physical market.
Stocks are mostly being shuffled
from one warehouse to another rather than going to consumers as
traders continue to tie up metal in financing deals, market
"There is a lot of metal going
out," the producer told AMM, pointing out that 2,925
tonnes of metal was delivered out of LME-registered warehouses
in Detroit Thursday. "Unfortunately its just not going to
the consumers. Its going to other warehouses. So while it
appears that the stocks are decreasing, theyre really
not. Theyre just hidden."
The warehousing deals mean that
supply in the physical market remains tight.
"When you think about it,
its completely ridiculous. But theres money in it.
So people will keep doing it," the producer added.
But producers and traders have
little incentive to stop financing aluminum, provided the
cash-to-three-month spread remains in contango, as they can
profit from storing the metal.
The July 18/Dec. 17 spread was
in a contango of $36.75 per tonne Friday, while the July
18/Sept. 7 spread was at $21.50 per tonne, according to LME