CHICAGO Midwest aluminum
premiums have ticked up on low primary aluminum prices, stable
demand from end-users and traders, and tight scrap supply.
Midwest premium now stands at 11.5 to 12 cents per pound, up on
the low end from 11.35 to 12 cents previously.
Business levels picked up in
recent days due to low prices for primary metal and a contango
on the London Metal Exchange, some traders said.
"When the price is lower, people
arent focusing as much on the premium ... so 11.5 (cents)
is no big deal," one trader said.
Thats especially true in a
market that appears to be "squeezed," the trader said. "You
still have metal going to warrants and there is a contango at
least until June, so people are bullish on premiums," he said.
"Whether (premiums) stay up I dont know, but for the time
being, theyre strong."
Market players generally pointed
to solid demand from the aerospace sector, firm demand from
automotive and a slowly but steadily improving building and
construction market as bolstering premiums.
Still, some sources fretted that
physical demand had hit a plateau. Demand has "flatlined a bit
relative to the last couple of weeks," a second trader said,
but added that even if demand has slowed, a tight domestic
scrap market has provided a boost to premiums. "There is very
little scrap available, so there are a number of customers that
need to buy primary aluminum to cover (their
Scrap flows had been held in
check by winter weather complicating logistics and low prices
on the LME making some scrap suppliers less willing to part
with stocks linked to LME tags, one market source said. The LME
price for primary aluminum is improving, as is the weather, so
those factors could fade into the background, he added.
The LMEs cash primary
aluminum contract ended the official session at $1,938 per
tonne March 14, down 0.4 percent from $1,945.50 per tonne the
previous day but up 2.2 percent from $1,895.50 per tonne March
But offshore demand, especially
that from China for zorba, should keep scrap prices elevated,
the market source said. "Everyone keeps talking about how bad
China is," he said. "They might be using less virgin metal, but
I think they are using just as much scrap as ever."
Some market sources continued to
express concern about whether historically high premiums would
be sustainable, given a backwardation in forward spreads on the
"Whats going to be
interesting it to see what happens with these spreads over the
second half of 2013," one producer source said.
If the backwardation eases,
premiums could increase further; but if it becomes more
pronounced, premiums could tumble, he said.
Global stocks in LME-listed
warehouses stood at 5.17 million tonnes at the close of
business March 13, down from 5.19 million tonnes on March 6,
the highest level thus far this year.