After a sharp slide, US Midwest aluminium premium may have hit a bottom

The US Midwest aluminium premium, now stable at a midpoint of 19.5 cents per lb – less than half of the all-time high midpoint of 40 cents per lb reached in April – has undergone extreme highs and lows in 2022.

Fastmarkets’ assessed the aluminium P1020A premium, ddp Midwest US at 19-20 cents per lb on Friday, unchanged from Tuesday, October 25 and steady for the first time since September 6.

“I believe we are hitting bottom,” one buyer said.

Midwest premium target ranged from 24- to 50-cent-per-lb midpoint in 2022

The Midwest aluminium premium started 2022 at a midpoint of 30 cents per lb.

In late March, market participants predicted that the premium would hit a midpoint of 50 cents per lb.

But by early June, expectations for the premium had fallen to a midpoint of around 24 cents per lb.

Following Russia’s invasion of Ukraine on February 24, supply concerns caused the Midwest premium to reach an all-time high midpoint of 40 cents per lb on April 8, where it remained until May 3.

Demand concerns subsequently took over, with fears of recession outweighing the anticipated halt in aluminium supply from Russia.

Most US aluminium market participants pay attention to the P1020A premium because it affects prices for aluminium scrap, alloys and value-added products such as extrusions.

Overseas aluminium market participants also watch the Midwest premium for the best arbitrage opportunities.

P1020 reaches a plateau, at last: sources

According to October 12 report, the US was reconsidering banning imports of Russian aluminium. Paradoxically, the Midwest premium continued to decline in the following assessment on October 14.

This week, spot demand for aluminium remained subdued in the US, especially with many market participants attending the London Metal Exchange’s annual event, LME Week, which concluded on October 28.

In the latest assessment, Fastmarkets heard that a producer continued to reduce premium offers to consumers.

Most buyer and seller sources, however, said the premium has stabilized.

“It’s held in a tug of war between weak economic conditions on one side and low inventories on the other,” a second buyer said.

“I think this is the bottom,” the buyer said, but added that “only the bravest among us are willing to buy metal right now.”