CHICAGO Midwest spot
premiums for aluminum P1020 have inched up, with some market
players predicting further increases and others cautioning that
such talk has been overblown.
Demand from both the financial
community and physical users, especially in the automotive
sector, remains strong, several sources said. The majority of
sources contend that premiums of 11 cents were no longer
Reasons for the uptick include a
seasonal boost in activity and ongoing supply restraints caused
by the amount of material tied up in London Metal
The market is "trying to find
its true place but is (going in) an upward direction, no
doubt," one trader said, noting that his company was seeing
premiums of 11.3 to 11.5 cents per pound.
One producer source said that
his company recently sold 600 tonnes at slightly above 11.5
cents, while others reported higher numbers. "There is a more
bullish tone for the (Midwest) premium ... and pretty much (all
end markets) are healthy," he said.
Reports of transactions at
higher numbers led AMM to increase its Midwest premium
to a range of 11.3 to 12 cents per pound Jan. 24 from 11 to 12
Financing continues to be
available and the U.S. economy has been resilient despite
recent political turmoil, factors perhaps bolstering physical
demand for metal, one consumer said. However, he believes that
the most salient feature of the current market is that the
ongoing contango means traders continue to put metal into
Alcoa Inc. chairman and chief
executive officer Klaus Kleinfeld said recently that the
aluminum inventories would be absorbed by the physical market
even if the contango were to disappear (
amm.com, Jan. 9), but one trader cautioned that a
current backwardation in the forward spreads might be a sign
that the financing deals could end and premiums would likely
hold their ground if not reverse course. "In a back, premiums
go down," he said. "Thats just the way it is."
Nearly 5.2 million tonnes of
aluminum were held in LME-registered warehouses at the close of
business Jan. 23, on par with the previous week, the most
recent exchange data show.
The trader also questioned
whether talk of premiums increasing might have come out of a
recent industry conference as an effort to push prices up. He
noted that his company had seen at least one potential client
"swear on (a) stack of bibles" that premiums were going to 13
to 13.5 cent per pound, but then decline an offer of 12 cents
for the year.