Australian alumina ban helps send key US aluminium premium back to peak

The benchmark aluminium premium in the United States returned to its recent peak, amid rising offers to consumers and bullish sentiment in the US, after Australia banned sales of alumina to Russia.

Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US at 38-40 cents per lb on Friday March 25, up from 37-39 cents per lb on Tuesday.

The premium had fallen from the 38-40 cent peak last Friday in reported discounting amid declining metal prices on the London Metal Exchange and continued declines in mill-grade scrap, which is most tied to the metal price.

However, LME aluminium prices reversed direction this week after Australia announced it will no longer sell alumina to Russia, potentially limiting the huge producer’s ability to make metal.

“Choking the supply of raw materials into Russia means that the world’s second-largest aluminium producer, Rusal, will have to find alternative sources of supply, which will be very challenging if other countries take a similar stance to Australia,” Fastmarkets research analyst Andy Farida said on Friday.

And former US aluminium industry executive and economist Lloyd O’Carroll, who is now an independent consultant, based in Richmond, Virginia, said the curtailing of alumina supplies into Russia would have a big impact.

“It will really hit home,” he said. “There’s only one alumina refinery in Russia, one in Kazakhstan (that feeds Russia) and an alumina refinery/smelter in Ukraine - but I can’t imagine that’s operating.

“Premiums could go higher on this and the long-term trend toward reduced global supplies,” he added.

A US aluminium trader said there were still some good deals available from producers.

“Premium offers to consumers are up by 0.5-1 cent per lb this week,” he said.

Producers were said to have lowered their offers last week, less worried about premiums and looking to capture high metal prices before they began to decline.

Aluminium futures traded at their highest ever price on the LME at $4,000 per tonne during trade on Monday, March 7.

The benchmark three-month price was up week on week and trading above $3,600 per tonne late on Friday, March 25.

Meanwhile, all mill-grade aluminium scrap prices rose in a general uptrend in Fastmarkets’ assessments on Thursday, March 24.

Several aluminium buyers said the Midwest P1020 premium for primary metal was up towards the high end of Fastmarkets’ 38-40 cent range.

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