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Midwest premiums stable despite demand dip

Keywords: Tags  Midwest premium, P1020, weather, scrap, automotive, wheels, construction, foundry distribution

CHICAGO — Midwest aluminum premiums held steady over the past week, even as some market players questioned whether demand is showing signs of easing.

"It has been slow out there. ... We’re still seeing some decent business, but the phones aren’t ringing off the hook, that’s for sure," one aluminum trader said.

AMM’s P1020 Midwest premium remained unchanged this week at between 11.35 and 12 cents per pound.

The trader said he couldn’t pinpoint exactly what might have caused the apparent slowdown, noting that it hasn’t been severe enough to translate into lower premiums.

"We’re in the same boat we’ve been in for about the last two weeks," a consumer source agreed, characterizing business as coming in "dribs and drabs," with premiums staying flat.

But others said that consumer confidence might be taking a hit, and reluctance to buy might be starting to affect producers of aluminum and aluminum products.

"Consumers just don’t have as much money to spend," one market source said. "Car sales have been good but not as strong (as) some thought they might be. You keep hearing that housing starts are great. But are they? And ... the guy who was talking about home improvements and going to Home Depot—he isn’t."

Thanks to comparatively strong automotive demand, foundries making aluminum wheels are doing well, the market source said. But distributors, extruders and rolling mills might be seeing business "quiet down," he said.

While requirements from end-users might be less than had been expected, other factors are expected to bolster demand and premiums, the market source said. The easing of a backwardation on the London Metal Exchange, for example, could provide a boost in financing deals, he said.

In addition, winter storms in the United States may help keep prices stubbornly high for some grades of scrap despite continued declines in aluminum tags on the LME, the market source said. That should make P1020 attractive to potential buyers who might otherwise look to scrap to meet their needs, he reasoned.

The LME’s cash primary aluminum contract ended the official trading session at $1910.5 per tonne March 7, down almost 1 percent from the previous day and off 2.5 percent week on week.

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