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Midwest aluminum premiums narrow

Keywords: Tags  Midwest premium, P1020, LME, aluminum prices, trucking costs, aluminum, Michael Cowden

CHICAGO — Midwest aluminum premiums rose slightly this past week after discounts subsided in the wake of lower metals prices on the London Metal Exchange.

AMM’s Midwest aluminum premium narrowed to 11.45 to 11.85 cents per pound May 16 from 11.2 to 11.85 cents previously.

One trader source, echoing other market participants, characterized the current market as sluggish, especially for a time of year that generally sees increased activity. But it could be a lack of liquidity that is helping to keep premiums up, he said.

"The Midwest (premium) feels like it’s under pressure ... and if you want to move big volumes, you are going to have to give the premium away—that’s all there is too it," the trader said. "But you can’t move (premiums) when there is no business."

Higher premiums will generally be the case with "piddling" volumes, the trader noted.

A second trader said his company was able to sell a parcel of P1020 this past week at an 11.45-cent premium after a week earlier being unable to sell that same parcel at what it considered a 0.25-cent discount to the Midwest premium at the time. He didn’t know exactly why customers might have stopped asking for discounts this past week, but speculated that it might have been a result of a big decline in LME prices in the earlier part of the week.

"If price goes down significantly—$40 to $80 (per tonne)—then 25 cents (discount) on (the) Midwest (premium) might not seem as important," he said. "Why fight for $5 (per tonne) on (the) Midwest (premium) if $70 to $80 (per tonne) was just knocked off the LME?"

The cash aluminum contract ended the LME’s official session at $1,840.50 per tonne May 17. Prices had dropped to $1,800.50 per tonne May 15, down 4.6 percent from the May 8 price of $1,886.50 per tonne.

While discounting might have paused, few market players interpreted the trend as an indicator of a ramp-up in activity for the coming weeks.

"Normally we see some kind of seasonal upswing during these months. We’re not seeing it as much this year," one producer source said. However, he noted that demand has held steady since the beginning of the year.

A third trader mostly agreed. "April to June in normal times tend to be pretty decent months. But there just doesn’t seem to be as much spot demand (as usual) right now," he said.

Building and construction "is doing a little better" and automotive is "OK," but orders from die casters for May and June haven’t come in as strong as expected, he added.

While the market "sucks," metal remains tight in some regions, a consumer source said. He hasn’t seen any big changes in Midwest premiums, but voiced concern about trucking costs going forward, especially in the South as produce season kicks into high gear.

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