NEW YORK Aluminum P1020 market players remain mixed over how the resolution of the fiscal cliff standoff will impact markets in 2013.
Although global markets reacted favorably to Congress avoiding falling off the cliffthe London Metal Exchange three-month aluminum price bumped up 3.6 percent to $2,145.50 per tonne Thursday from $2,071.50 on Dec. 31sources are skeptical this trend will continue, maintaining that issues such as spending and the debt ceiling still need to be resolved.
"I dont think the fiscal situation has been solved. They only covered taxes; they havent covered spending, and that has to be addressed," one trader told AMM.
While equity markets reacted favorably Wednesday, this does not mean U.S. markets are out of the woods yet, a second trader said.
"Once this excitement, if you can call it that, (cools down) well probably see some drifting down of (aluminum) prices," a third trader said. "(Congress) didnt solve the problem."
A producer source disagreed. "From an industrial point of view, it can only help demand. It brings more certainty," he said.
Although demand could benefit as a result of the deal, it has not inspired so much confidence that producers and extruders will rush to expand capacity, the second trader said. "No one is going to make any business decisions based on this fiscal cliff resolution. I dont think theres anyone out there saying, Weve resolved the fiscal cliff, so lets crank up the presses and hire more people. Everyone in this industry is reactionary. They only add people when their customers order more. And when I say order more, I mean order morenot thinking about ordering more."
The third trader agreed. "Investors will grow weary about the uncertainty again, and this positive feeling will fade," he said, adding that most of his consumers remain cautious. "They all still have a wait-and-see attitude."
Few spot deals were closed this week, keeping Midwest premiums at between 10.5 and 11.5 cents per pound.
"We did some business in the 11-cent range (this week)," the third trader said. "But most of our consumers are covered for January and a little hesitant to book additional business. They just dont know how January will shape up yet."
"We havent done much, its still a ghost town," the producer source said.
"This week, people are just trying to sort themselves out, exchanging 'Happy New Years' and getting rid of the last effects of the hangovers," the second trader said.