Aluminium premiums dropped still further on Friday February 27, as market participants reported increasing desperation to unwind long positions.

Metal Bulletin’s duty unpaid European premium fell to a weighted average of $302.63 per tonne, with a range of $295-308, while duty paid premiums came down to $370-415 per tonne on both a cash and a three-month basis.

“We’re not able unwind our longs in the way we want. The end-customers can really hand [pick] – they’re the ones who can say, ‘that’s where I’m willing to buy’,” a producer said.

“Warrant cancellation games are not working either because the costs are quite enormous if you hold material even for a few days.”

A large amount of material had been delivered into Vlissingen warehouses earlier in the week, participants said, but stocks overall continued to fall and appeared to be entering the spot market.

Inventories were down another 7,725 tonnes across LME sheds on Friday to 3,946,650 tonnes, and prices remained around the $1,800 mark.

“People have been used to doing cash-and-carry for long-term deals and now they want to get out of their positions,” a trader said.

“This movement down is not finished.”

The outlook for the light metal is uncertain, a second producer said, and is unlikely to improve as more and more material is delivered out of warehouses.

“Without the contango-financing possibilities, most of it will flow into the market,” he said.

It is now becoming less profitable to hold material in warehouse, furthermore, as the premium level does not justify paying the storage cost, sources have said.

Claire Hack
Twitter: @clairehack_mb