NEW YORK Midwest aluminum
spot premiums remain steady at between 11.5 and 12 cents per
pound as warehousing games continue to keep supply tight.
In the latest move, canceled
warrants in London Metal Exchange-listed warehouses in
Baltimore rose by 81,275 tonnes March 21. The material is
likely to be delivered to Metro International Trade Services
LLCs warehouses in Detroit rather than going to physical
consumers, traders told AMM.
"Its going to Metro," one
trader said. "They want to continue to vacuum up metal. And
they were able to strike a deal with whoever held the metal in
"I heard it was going to Metro,"
a second trader said.
Metro did not respond to a
request for comment.
LME-listed warehouses in Detroit
held 1.4 million tonnes of aluminum March 26, with canceled
warrants at 896,175 tonnes. Queues for delivery of metal out of
warehouses in Detroit stretch to summer 2014. In comparison,
stocks at Baltimore warehouses stood at 323,675 tonnes, with
traders estimating queues at around three months.
Financing deals remain lucrative
for traders as markets remain largely in a contango.
The financing deals are keeping
premiums high by keeping supply off the market, the first
trader said. "The politically correct way to characterize the
current warehousing situation is, Theyre
aggressively sourcing more material. The politically
incorrect way of saying it is, Theyre vacuuming it
Still, a consumer source told
AMM he is having no problem getting his hands on
metal, and has even managed to get some discounted premiums.
"There seems to be availability of P1020, Were looking to
buy some spot now to fill in our orders," he said. "I would say
11.5 (cents) is probably reasonable at the moment, but in my
view I can push that. My producers are offering me
Sinking LME aluminum prices
spurred some buying interest earlier in March. Three-month
aluminum ended the March 28 official session at $1,910.50 per
tonne, down 1.1 percent from $1,932 at the beginning of the
week and 11.8 percent below this years high of $2,165.50
per tonne on Feb. 15.
A third trader said most of his
consumers were covered in the past week. "There was a lot of
activity two weeks prior when the LME price dropped. While
pricing has continued to drift lower, it hasnt dropped to
substantially lower levels. And I think people got a lot of
business done two weeks ago (so theyre set)," he
"Its quiet because of
Easter," a fourth trader said.
While some consumers may want to
resist the historically high Midwest premiums, the first trader
pointed out that global producers are operating below their
breakeven point at the LME prices, so high premiums are
actually helping them stay afloat.
"Producers really are in a world
of pain right now. The high premiums are keeping them from
going bankrupt," he said. "And how would that help consumers
(if they went under)? They need aluminum."