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Aluminum premiums hold, outlook improves

Keywords: Tags  Midwest premiums, aluminum, automotive, construction, nonferrous, Michael Cowden

CHICAGO — Midwest spot premiums for aluminum P1020 are holding steady, although market players generally expect both prices and demand to pick up in coming weeks and months.

Demand from the automotive sector has been strong, and some market players said that even the long-beleaguered construction sector is showing signs of a slow but steady resumption in activity.

"Automotive and transportation in general are extremely strong segments because of (increased fuel economy) standards that are pushing them to use more aluminum," one consumer said. Other markets, while not seeing the same growth, are largely holding steady, he said.

Other sources were more bullish. One trader said that his company had been doing "chunky volumes" adding up to thousands of tons in recent weeks thanks to demand in a variety of sectors, including construction. "The jack-in-the-box has not popped open, but we’re starting to see a head through the crack in the lid," he said.

The trader and others predicted that premiums could see a slow but steady rise in coming weeks and months, a trend they said could accelerate as business activity picks up in spring and summer. In the meantime, expectations about prices moving up appear to be outstripping any big upward moves. As a result, AMM Midwest premiums held in a range of 11 to 12 cents per pound.

Three-month aluminum settled at $2,057.50 per tonne in Friday’s official session on the London Metal Exchange, down 2.2 percent from $2,103 at the beginning of the week. LME-registered warehouses held nearly 5.2 million tonnes of aluminum, roughly on par with a week earlier, the most recent exchange data show.

Perhaps keeping a lid on prices are concerns about the debt ceiling in the United States, which may be holding back activity by end users, market sources said, with some noting that mild winter weather also was putting pressure on scrap prices.

One consumer contended that banks and traders were perhaps driving the market more than physical users of aluminum because the contango, when future prices are higher than current prices, has kept warehouse deals profitable. "Traders are looking to put metal down," he said. "And consumers are holding off until the debt ceiling works through."

Another trader largely agreed, saying that the physical market—at least for the moment—was largely treading water. "People are going to buy what they need. They are not going to speculate," he said.

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