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

The benchmark US Midwest aluminium premium was steady on Friday, October 28 for the first time since the beginning of September, prompting some sources to say the premium has reached 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.”

What to read next
Read more from senior analyst Andy Farida on how the price action in LME nickel has played out in the first half of 2024
Tight aluminium scrap availability, the increase in container costs, sluggish demand in the US and the US market’s current indifference to rising premiums in Europe and Asia were the top subjects discussed during the Harbor Aluminum Summit that took place in Chicago on June 4-6
The publication of Fastmarkets’ aluminium scrap and secondary aluminium ingot price assessments for Wednesday June 12 were delayed because of a reporter error. Fastmarkets’ pricing database has been updated.
Germany-based copper recycling and non-ferrous metal provider Aurubis has started commissioning their secondary smelter in Augusta, Georgia, and could eventually introduce black mass recycling to the facility
Base metals on the London Metal Exchange were mixed in morning trading on Monday June 10, with three-month prices lacking direction amid thin traded volumes due a public holiday in China, the largest market for base metals
Copper concentrate treatment and refining charges have repeatedly fallen to record-low levels over the first five months of 2024