CHICAGO Midwest spot
aluminum premiums held their ground for another week Feb.
premium remained at 11.3 to 12 cents per pound, with the
majority of business transactions reported within that
"The markets have been pretty
steady and premiums are holding up well," one trader source
said, adding that he had booked "a couple of million pounds" of
business in the past week at 11.5 to 12 cents. He chalked that
up to what he characterized as a "healthy" spot market, in part
due to strong demand from the transportation sector.
A second trader sold 160,000
pounds of P1020 at 11.75 cents this week, up 0.25 cents from
last week. The customer "needed the metal for prompt delivery,
and replacement units are costly. Were in an upward
trending premium environment, so for us to continue to
replenish, premiums arent going down," he said.
One producer source said his
company was "completely sold out" for the next two to three
months and, therefore, was out of the spot market. But if his
company did have spot P1020 available, it would be quoting
premiums in the range of 11.25 cents to 11.75 cents, he
Unlike some other sources, he
said the spot market in 2013 has been slower than in previous
years because some customers secured material on longer-term
contracts in late 2012 on the expectation of higher premiums
rather than leaving room for spot orders.
Meanwhile, a consumer source was
able to acquire metal at a premium of 11.3 cents per pound, he
said. He had heard of quotes as high as 12 cents, but
hadnt paid that much and presumed that this level would
have been for prompt metal.
A second consumer also reported
securing metal at premiums of 11.3 cents or lower, adding that
he had found premiums higher than prior levels despite no
change in physical demand.
"People dont have trouble
getting metal, they just dont like what they have to pay
to get it," he said, contending that high premiums in a market
with perhaps too much capacity was mostly related to warehouse
Global stocks in London Metal
Exchange-listed warehouses were at 5,147,800 tonnes at the
close of business Feb. 13.
And while premiums continue to
hold at high levels, the trader said there is increasing
concern about a LME backwardation in the summer. Traders had
said that the backwardation could affect the amount of metal
being held in warehouses, as the financing deals supporting
them are only lucrative when the market is in a contango (
amm.com, Jan. 24).
"That (backwardation) would not
bode well for the Midwest premium during those periods. ... No
one is running for the door yet. But they are watching it and
talking about it," the trader said.