NEW YORK In-warehouse premiums for aluminum in London Metal Exchange warehouses in Detroit have ticked up, with market participants agreeing to pay more in order to secure metal as queues extend out to the beginning of 2014.
The lengthening queues, combined with rising stock levels, bumped daily in-warehouse premiums in Detroit up to $160 to $190 per tonne this week from $140 to $180 per tonne previously.
"I dont want premiums to go up because I have to buy, but theyre higher," one trader said. "Really the only metal is in Detroit, (and) $160 (per tonne) is the lowest bid. I would say offers are at $190 (per tonne)."
Global aluminum stocks in LME-listed warehouses closed Monday at all time high of 5,172,500 tonnes after large deliveries into warehouses in Detroit and Vlissingen, the Netherlands, according to data from the exchange. Inventories in Detroit-registered warehouses stood at 1,461,825 tonnes, with canceled tonnage at 814,550 tonnes Tuesday.
"If I canceled today, I have to pay for a years worth of rent. And if I have warrants, Im going to offer to the biggest bidder. People will try to use that logic to get $180 or $190 (per tonne)," a second trader said.
Paying to wait in long queues is not an appealing option for consumers, with most choosing to buy directly from the producers.
"How much of the metal (from warehouses) actually gets to the consumer is the question," the second trader said.