LONDON European aluminum
consumers have stopped buying on the spot market as they
anticipate further decreases in the cost of metal following
significant dips in both London Metal Exchange prices and
AMM sister publication Metal Bulletins
premiums in recent weeks.
Three-month aluminum closed
trading March 22 at $1,938 per tonne after trading at about
$2,165 per tonne in mid-February, while Metal
Bulletins duty-paid aluminum premium stands at $280
to $290 per tonne, down from a record high of $290 to $305 per
tonne earlier in the quarter.
Backwardations along the LME
forward curve are keeping traders firmly on the selling side,
while consumers are not booking much material with the
expectation that purchase prices will fall further.
"Ive spoken to a few
traders and they are all trying to sell now," a consumer said.
"They dont want to hold units through the backwardations,
but I still think the market will fall in the next few
Additionally, absolute demand
levels for consumers are low, with their own sales suffering
alongside the wider European economy.
"In the next two months, there
will be a lot of pressure as demand is very poor," the consumer
said. "All over Europe, its terrible, and people
arent buying a lot. There is competition to sell, and
premiums will come down more."
A second consumer confirmed that
he was also not in the spot market for metal as long as
premiums look like they could go lower still, which he expects
due to the backwardations in the June/July, September/October
and December/January aluminum spreads on the LME.
"My feeling is that premiums
will fall further. It doesnt make sense with these
backwardations to put more metal into warehouses for
financing," the second consumer said. "If I need metal,
its very easy. I just call a few people and get an
Some traders have lowered their
offer prices so much to secure business that it has allowed for
a few back-to-back deals that many market participants have not
seen for more than a year.
"Ive been able to do some back-to-back business after
picking up from another trader, and Ive not done that
since December 2011," one trader said.
A version of this article
was first published by AMM sister publication Metal