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Europe aluminum premiums log first drop since Dec. 2011

Keywords: Tags  aluminum, aluminum premiums, European premiums, LME, aluminum prices, Jethro Wookey


LONDON — European duty-paid aluminum premiums fell Feb. 6 for the first time since December 2011 as sellers accepted lower prices to shift material.

The duty-paid aluminum premium of AMM sister publication Metal Bulletin slipped to $290 to $300 per tonne from $290 to $305 previously, while the daily duty-unpaid range fell to $210 to $225 per tonne from $210 to $230.

Premiums fell as sellers had to lower offers in a very quiet spot market, with much of consumers’ first-quarter needs covered through short-term contracts signed late last year.

Having done little business in January, market participants reported decent tonnages this week at lower premiums.

"We bought material for this quarter at lower numbers from a trader, who took the deal because the market is very quiet," one consumer said. "There are still some (duty-paid) offers at $305, but no one is doing business there now."

Additionally, a backwardation between the June and July contracts on the London Metal Exchange has led stockholders to sell ahead at premiums below the top of recent ranges.

"It’s a combination of uncertainty over the forward spreads and there not being much spot interest in either January or February. So some people are looking to offload a bit of metal, and some companies also have their year-end in March," one producer said.

"If (the December-to-January spread) was a good proxy for how wide these spreads can get, then there is clearly room for more tightness as the larger players seek to get more material under their control," one analyst said in a daily note Feb. 6, when the June-to-July spread eased into a $13 backwardation in pre-market trading vs. $17 at the previous day’s close.

But others are wary that some of the lower premium offers now being seen in the market could be eliminated.

"In two months, the backwardation might not be there anymore and premiums could be back above $300," the consumer said.

Premiums will see more upward pressure if more buyers come into the market over the remainder of the quarter.

"Most customers booked about 25 percent less than their budgeted needs for the first quarter," leaving some hopeful of lower premiums, a second producer said. 

A version of this article was first published by AMM sister publication Metal Bulletin.


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