aluminum premiums dipped last week due primarily to proposed
changes in London Metal Exchange warehousing regulations.
spot P1020 aluminum premiums dropped to 10.5 to 11 cents per
pound Aug. 28 from 11 to 11.25 cents previously.
generally said they expected the decline to continue, with some
predicting that contract negotiations could be delayed until
after the LMEs fall dinner in early October, after which
the new rules are expected to be promulgated.
Some trading companies
were said to be aggressive sellers, looking to offload metal at
premiums of 9 cents or less for 2014 contracts due to
expectations that premiums could move to or below those levels
by year-end, market sources said.
"There is no longer a
backstop ... so there is plenty of room for premiums to drop,"
one trader said. "As soon as the LME changed the rules, the
game was over. The premiums arent going up any more. ...
The incentives that were being paid cant be paid
Premiums should never
have risen as high as they did, the trader said, predicting
that they could fall another 2 to 3 cents per pound. However,
he cautioned that cheap financing means it is unlikely metal
will flood the market.
"Weve gone back
to fundamentals," he said. "And its not fun on the way
down, its only fun on the way up. ... So were a
bunch of boring traders now."
Many buyers continue
to look to purchase metal on a formula based on future premiums
rather than locking in a fixed premium because they expect
prices to continue to tumble, market sources said.
proposed rules, announced this summer, arent expected to
go into effect until April 2014, although market sources said
the impact is already being assumed in current aluminum prices