CHICAGO Midwest aluminum premiums held steady this week despite concerns among some market participants that sentiment has gone from overly bearish to too bullish.
AMMs 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 East.
"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 LME Week.
Boosting premium 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."