CHICAGO Midwest aluminum
premiums have edged up slightly due to low prices on the London
Metal Exchange and weak scrap flows, even as the overall demand
situation remains largely unchanged, according to market
premium has inched up to between 11.35 and 12 cents per pound
this week from between 11.3 and 12 cents per pound last
The slightly higher premiums
come at a time when exchange-traded aluminum prices are on the
"Usually when the LME comes down
is when the higher premiums are paid," one market source said,
noting that some customers pay less attention to premiums than
an "all in" price comprising both the LME price and the
premium. That all-in price may have dropped from between $1.06
and $1.07 per pound last week to about $1.03 per pound this
week due to a falling LME price, even with the slightly firmer
premiums, he said.
The LMEs cash primary
aluminum contract ended the official trading session at $1,960
per tonne Feb. 28, down 4.3 percent from $2,047 per tonne the
same time last week.
"When the price is down, the
(higher) premiums are easy to sell. (Buyers) see a $100 (per
tonne) drop in the price, and they dont worry about a few
points on the premium," one trader said. "And thats
whats going on right now."
In addition, aluminum scrap
flows have slowed in some regions due to bad weather across
much of the United States, bolstering demand for prime material
and putting upward pressure on premiums as well, sources
"Some traders who owned scrap
just couldnt get it out this week," the market source
said. "So if someone needed material, then they maybe had to
buy prime. ... And theyre not too concerned about the
price because they need to keep their plant running."
As a result, the trader said his
company has not transacted any deals below 11.35 cents per
pound this week and has even booked significant tonnages at
premiums as high as 11.5 cents per pound.
But while the trader said his
company has seen some uptick in activity at the lower overall
price levels, he acknowledged that some buyers continue to sit
on the sidelines as they wait for further metal price
A second trader confirmed the
trend, noting that his orders are up but not dramatically so.
Buyers may "nibble" at low prices, he said, but more business
will probably come after prices stop falling.
"If (the LME price) recovers and
then comes back down, youll see more (bookings)," he
predicted. "Well always get that kind of stuff. People
trying to pick bottoms. But definitely these are really
attractive numbers for consumers."
Even if no big surge in business
has happened, the second trader said most indicators were
nonetheless positive. In deals that specify that a buyer order
a certain volume of material each month, referred to as
"min-max" contracts, for example, most buyers have come in at
the mid- to high-end of their ranges, he said.
"Lets say its 500
(tonnes minimum) to 1000 (tonnes maximum). Most are coming in
anywhere from 750 to 1000 (tonnes)," the second trader
But while market sources
continued to express optimism about a variety of aluminum
end-use sectors, most said they had not seen a major change in
physical demand. At the same time, much of the current business
is driven more by contract rather than spot buyers, several
market sources confirmed.
Still, there is business to be done. "Our consumers are
finally coming in and saying, We like these prices,
theyre at three-month lows and we want to lock-in," a
third trader said, noting that his firm had seen fixed-forward
interest for the second quarter, the rest of the year and even