aluminum premiums continued to hold their ground this week,
with market participants describing current price ranges as
either stable or poised for a rebound.
are a market contango that is bolstering demand from the
financial community, tightness in some regions of the United
States due to production shutdowns, more disciplined pricing
and main Japanese port premiums attracting metal to Asia,
market participants said.
The latter factor was
noted during a recent earnings conference call by Oslo,
Norway-based Norsk Hydro ASA. "If you look at the recent quotes
of ingot premiums, they are down 15 to 20 percent compared to
the highest recorded levels. But Japanese premiums are holding
up around $250 per tonne (11.3 cents per pound)," president and
chief executive officer Svein Richard Brandtz said. That could
be due to the fairly tight ingot market in Asia and because the
region is less impacted by potential changes to London Metal
Exchange warehouse rules (
amm.com, July 1), he said.
spot P1020 aluminum premium was unchanged Oct. 23 at 9.5 to 10
cents per pound, although some sources reported smaller deals
at numbers slightly above that range.
"Units are a little
bit tighter, so some customers are saying its getting
tougher to get prompt delivery," one trader said. "And
(financial buyers) can just stick it into a warehouse, gain the
contango and finance it, which is supportive of nearby
One market source said
he also was seeing premiums strengthen due to a tight scrap
market that is pushing extruders to use more P1020, as well as
Ormet Corp.s shutdown (
amm.com, Oct. 4).
But not all are
convinced that premiums are firming, yet alone rising.
Speculators looking to
establish a long position might be willing to pay more than 10
cents, but physical consumers continue to insist on
single-digit premiums, a second trader said. "Sure, some metal
is going overseas, but that kind of arbitrage goes on all the
A third trader
questioned the logic of premiums going up ahead of a
traditionally slow November and December. "Yes, some people are
out looking for metal," he said, "but the market is quiet."
That calm comes in
part because his companys "mating season" for 2013
business is winding down, the third trader said. Echoing
others, he said most long-term deals for 2014 were transacted
on a floating premium basis. "Everyone wants to travel with the
same herd," he said.