Aluminium premiums reach new highs in Europe, steady in US, Japan, Brazil
Aluminium premiums in Europe continued to reach new highs in the week to Tuesday May 3, while premiums in the United States, Japan and Brazil were unchanged but well supported.
• European premiums higher on severe logistics issues in Rotterdam
• US Midwest premium unchanged week on week despite bearish sentiment
• Brazilian premium steady on limited spot activity
• MJP premium unchanged amid Golden Week holidays, but South Korean market gains momentum.
European premiums set new highs
European aluminium premiums continued to rise in the week to May 3, with premiums across the continent setting new all-time highs because of severe logistical issues.
Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam, at $600-630 per tonne on Tuesday, matching the new record high set for the premium the preceding Friday but up from $600-620 per tonne one week earlier.
“There is an unbelievable mess in Rotterdam with logistics - it is beyond a nightmare. There is double the amount of usual volume trying to enter the port and half the number of staff,” one trader in the region said. “This is a whirlwind situation. It should get easier, but it won’t disappear in May.”
Fastmarkets assessed the aluminium P1020A premium, in-whs dup Rotterdam, at $500-510 per tonne on May 3, unchanged from Friday’s assessment but up from $480-500 per tonne one week earlier.
“It’s just scary how little metal there is out there, and we don’t see… within the next few weeks, where it’s going to come from. The logistics make everything worse, and we can’t get our hands on new material,” a second trader said.
“It currently takes two months to get your units, when it should take two weeks,” a third trader added.
Some thought the supply shortages would ease over the coming months with fresh deliveries of material expected to enter the region.
“Premiums are very high right now, there’s no denying it, but with thousands of tonnes expected to arrive from Asia alone, I think - further out - the supply situation will be more relaxed,” a fourth trader said.
Outside Rotterdam, premiums were also up in Italy, following fresh liquidity reported at higher levels over consecutive recent sessions.
Fastmarkets assessed the aluminium P1020A premium, fca dp Italy, at $630-655 per tonne on May 3, widening upward from $630-650 per tonne one week earlier.
US premium holds on shaky base
The benchmark aluminium premium in the US was steady on May 3, but with continued signs of downward pressure from a darker economic outlook.
Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US, at 39.75-40.25 cents per lb on Tuesday, unchanged from April 26, when it came down off a 19-year record.
The premium had held at a 41-cent ceiling in the previous six assessments, its highest point since Fastmarkets’ assessment began in January 2003. It is assessed twice weekly, and its previous level was 39-41 cents per lb on April 22.
In this assessment period, some traders lowered their offers to consumers to 40 cents per lb, from 41 cents per lb.
Meanwhile, traders were now getting lower offers from producers overseas, they said, in addition to domestic producers.
US producers were reported to have progressively reduced their offers recently. There was typically another 0.25-cent drop in the price per lb in this assessment week, following a 0.5-cent drop in the previous session, one trader said.
“The softness is upon us, but how much the premium will go down, no one knows,” the source said.
Lockdowns in China during its worst Covid-19 outbreak since the start of the pandemic, plus the war in Ukraine, and a contraction in the US economy in the first quarter, have all depressed sentiment.
For now, however, US supply was said to remain relatively tight while demand was decent.
Premiums paid by consumers were almost invariably higher than those paid by the trade and “41 cents [per lb in Midwest premium] was supposedly done,” a second trader said.
Buying was reduced by the London Metal Exchange having been closed on May 2 for a national UK holiday, the same source added.
Brazilian premiums steady on limited spot activity
Aluminium premiums were stable in Brazil over the past fortnight due to limited spot liquidity. Customers were said to have a stronger appetite for new batches but were mostly choosing domestic material under longer-term contracts.
Fastmarkets assessed the aluminium P1020A premium, cif dup Brazilian main ports, at $500-520 per tonne on Tuesday, unchanged from April 19, when it had increased by 4.08% from $480-500 per tonne on April 5.
The corresponding assessment of the aluminium P1020A premium, delivered São Paulo region, was $480-540 per tonne on Tuesday, also stable on a fortnightly basis but 0.99% higher than $470-540 per tonne on April 5.
Some seller sources still believed it feasible to offer imported material at $500-520 per tonne cif to Brazil, but that level was seen as out of date compared with other global markets such as Europe and the US.
“Freight rates are on the rise again, and shipment delays seem to be relatively common these days,” one trader source said. “If you take that into account, together with higher Rotterdam and US Midwest levels, for example, Brazilian premiums are out of date.”
Even if those cif premiums were seen as a discount to foreign markets, however, they continued to be more expensive than domestic material. The São Paulo region was still receiving offers at $480 per tonne ddp, compared with prices of at least $540 per tonne ddp for imports.
Most businesses, on the other hand, were being conducted under contracts, not in the spot market, participants added.
MJP market stable, Korean premiums well supported
The aluminium premium in Japan was unchanged amid thin liquidity in the week to May 3.
Fastmarkets assessed the twice-weekly aluminium P1020A main Japanese ports (MJP) spot premium, cif Japan, at $150-160 per tonne on Tuesday. The premium had been assessed at $150-170 per tonne on April 22.
The country’s Golden Week runs from April 29 to May 5, a period in which a series of public holidays fall.
Some traders have been rushing to liquidate stocks ahead of the holiday, and quoting offers at $150-160 per tonne, yet with no business being concluded. Meanwhile, demand was weak due to persistent production cuts in the automotive sector, pushing the market more in favor of buyers, Fastmarkets heard.
“I’m afraid the market could trend lower due to the [difficult] demand, but low supplies also prevent the market from [taking] a sharp fall,” one Japanese trader said.
Nonetheless, some other traders remained watchful of market movements, citing a mix of headwinds and tailwinds.
“I see mixed signals, so right now I’ll just hold my [position], and we’ll see the direction of the market more clearly after the holiday,” a Singapore-based trader said.
The combination of softer aluminium prices along with the cash/three-month spread being in a contango has provided some support for traders to hold on to the light metal.
The lower aluminium price on the LME, however, has not spurred buying interest in the spot market, with buyers still regarding an aluminium price beyond $3,000 per tonne as “high.”
Elsewhere, the South Korean market saw demand gaining traction.
Fastmarkets assessed the aluminium P1020A premium, fca South Korea, at $165-185 per tonne on Tuesday, up by $5 per tonne from a week earlier.
And the aluminium P1020A premium, cif South Korea, was $150-170 per tonne on Tuesday, also up by $5 per tonne week on week.
Sources noted that fewer offers from China for coil, which can be re-smelted into downstream products for the same usages of the light metal, have emerged in April, which goes some way to explaining the upside to the premium in the South Korean market.
“Now I don’t see any offers [of coil from China],” a Korean trader said.
Fastmarkets understands that thinner export profits, along with Covid-19 controls on transport, have brought export activity to a halt.