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US aluminum premiums hit fresh record highs

Keywords: Tags  Midwest premium, P1020, aluminum, London Metal Exchange, LME warehouses, automotive, Suzy Waite

NEW YORK — A pickup in aluminum P1020 demand this week pushed Midwest spot premiums to fresh record highs, with most participants anticipating a further increase on the horizon.

Midwest premiums rose to 11 to 12 cents per pound from 10.5 to 11.5 cents previously.

"People came in for spot that never buy spot," according to one trader, who sold several hundred tonnes over the past week. "This one particular customer serves the automotive sector. I don’t know if it’s a one off or a trend, but so far so good."

A second trader agreed. "Yeah we’ve had a bit of business (this week.) I sold a couple of (loads) at 12 cents yesterday," the second trader said Thursday.

"We’ve done a bit this week for delivery in the next couple of months," one producer said.

AMM recorded trades of approximately 2,000 tonnes of aluminum over the past week.

"I expect (premiums) will bump up as we move along in the quarter," a third trader added.

Midwest premiums rose steadily last year as millions of tonnes of aluminum were locked in queues at London Metal Exchange-listed warehouses.

The contango is expected to persist this year and keep aluminum stocks high, but Alcoa Inc.’s chief executive officer said Tuesday that there will be enough physical demand to absorb the stocks even if the contango disappears. (, Jan. 9).

LME-registered warehouses held 5.2 million tonnes of aluminum Wednesday, the most recent exchange data show, while the Jan. 16/Feb. 20 spread hit a contango of $17 per tonne Thursday.

Still, consumers are only buying P1020 for their immediate needs as uncertainty remains in the market despite positive automotive forecasts.

"We’ve had a mixed bag. Yesterday we had one customer who needed additional business for January, (but) then we have some customers who are all covered for January and a little hesitant to book additional business. They just don’t know how January will shape up yet," the third trader said.

"It seems like the auto guys are doing pretty well and a lot of (producers) are shifting focus to auto segments. But I don’t get the sense that (my customers) are overly optimistic. It’s the beginning of the year. People are still finalizing their business," the second trader said.

"Business is OK, it’s not great. It’s a typical January, people are getting back this week and putting their ducks in a row," a fourth trader said, adding that the 3-percent rise in LME aluminum prices this week likely curbed some consumer enthusiasm.

Three-month aluminum stood at $2,109 per tonne in Thursday’s official session on the LME, up 3.3 percent from $2,041 per tonne on Monday.

"The market’s run up, so some people backed off. No one wants spot at these prices. Once you see metal at $1,850 (per tonne), you don’t want to buy at $2,100," the fourth trader said.

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