aluminum premiums held steady this week despite concerns among
some market participants that sentiment has gone from overly
bearish to too bullish.
spot P1020 aluminum premium was unchanged at 9.5 to 10 cents
per pound Oct. 17.
Several market sources
noted that Midwest premiums could see upward pressure in the
coming weeks in large part because of higher premiums abroad
and lower freight rates to other locations.
One trader said his
company was having trouble sourcing metal because premiums in
Asia, notably Main Japanese Port premiums, are higher than the
Midwest premium. At the same time, freight to the region is
lower, especially for producers in Asia and the Middle
"The premium in Asia
will have to come down or the Midwest premium will have to go
up in order to start bringing the metal thats needed to
the U.S. market," he said, adding that his company had recently
bought some 250 tonnes but had to pay a Midwest premium of 10
cents because lower numbers werent available.
A second trader
questioned whether it was necessary to pay 10 cents per pound,
pegging Midwest premiums in the range of 9.5 to 9.8 cents. But
he, too, said its been harder to acquire metal in recent
weeks. Producers have been opting to ship to Europe, Far East
Asia and Brazil due to higher premiums, markets in deficit or
both, he said.
Because of such
trends, a producer source said his company was getting stronger
offers than expected for business in 2014. "The North American
market is structurally in deficitwhen you dont
count warehouse stocksand I think its showing right
now," he said.
A consumer said his
company had seen a marked shift in sentiment on Midwest
premiums, previously thought to be on shaky ground, as
consensus emerges that they might instead be firming. But he
questioned whether the new outlook was the result of market
fundamentals or the echo chamber of recent industry events like
sentiment are announcements in China that there will be no new
capacity, expected capacity curtailments elsewhere and forecast
increases in demand from the automotive sector, he said. "But
weve seen all that before ... And its just turned
out to be people trying to talk up the market."