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Aluminum P1020 premiums steady

Keywords: Tags  Midwest premium, P1020, aluminum, LME, LME warehouses, aluminum premium, Michael Cowden


CHICAGO — Midwest spot aluminum premiums held their ground for another week Feb. 13.

AMM’s P1020 premium remained at 11.3 to 12 cents per pound, with the majority of business transactions reported within that range.

"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. We’re in an upward trending premium environment, so for us to continue to replenish, premiums aren’t 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 said.

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 hadn’t 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 don’t have trouble getting metal, they just don’t 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 issues.

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.


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