Global aluminium premiums mixed amid low activity

Global primary aluminium premiums were mixed during the week to Tuesday February 7, mostly affected by weak spot demand and low activity in parts of Asia and in Brazil, while some markets remained supported amid growing tightness

• US premiums widen downward amid muted spot activity, bearish sentiment
• Premiums in Brazil widen on reported deals despite weak spot demand
• MJP premium up amid tightness for available units
• European premiums remain supported

US aluminium spot market generally muted

Fastmarkets assessed the daily aluminium P1020A premium, ddp Midwest US at 18.25-19.25 cents per lb on Tuesday, widening downward by 25 cents from 18.50-19.25 cents per lb, where it had been since January 22.

The spot market was generally muted during the week, but with some liquidity reported to Fastmarkets at the lower premium level by market participants.

News of the curtailment of the Magnitude 7 aluminium smelter in Missouri failed to push the premium higher because the market was expecting the news and had already priced it in, according to market participants.

Sources said they were being watchful of any disruptions to the supply and demand balance in Europe because the effects of such an event could trickle down to the US market.

“Premiums are as low as they can get. If the European market [is affected by] shipping issues, then it could [pressure the US premium upward,]” one trader said.

The US macroeconomic outlook also contributed to the bearish sentiment, according to a second trader.

“Now that interest-rate cuts are not expected until May, it sounds like there is no bullishness [in the market],” the second trader told Fastmarkets.

Quiet aluminium market reported in Brazil

The Brazilian aluminium P1020 premium widened during the assessed week amid reports of new deals both below the range for ingot with higher value-added tax (VAT) and above it for low-VAT.

Fastmarkets assessed the aluminium P1020A premium, delivered São Paulo region at $150-250 per tonne on Tuesday, widening from $160-230 per tonne a fortnight earlier.

Material with high VAT changed hands at $150-180 per tonne, according to sources.

One trader reported offers for high-VAT material at $185 per tonne, while a seller said $150 per tonne, which was the lowest deal confirmed for high VAT.

Low-VAT aluminium was mainly offered at $250 per tonne, with a few sources indicating premiums at $300 per tonne.

One indication for low VAT was given at $200 per tonne, with the lowest reaching $190 per tonne.

But market participants indicated that this price was too low and $250-300 per tonne was still the most likely premium to materialize into deals.

“It would surprise me to see prices below $250”, the first source said.

Spot demand remained weak, with no big news in the market, sources said.

“In Brazil, it’s too calm.We hope we have a better time after Carnival. But the market is tight right now,” another source said.

The Carnival holiday in Brazil will be celebrated from February 10 to 14.

Market tightness in Asia

The main Japanese port (MJP) premium rose over the past week amid market tightness.

Fastmarkets’ twice-weekly assessment of the aluminium P1020A (MJP) spot premium, cif Japan was $90-100 per tonne on Tuesday, unchanged from Friday, but up from $75-85 per tonne a week ago.

“Although demand in Japan is stable, the premiums in the other regions have been moving upward recently and it is difficult to source the metal at previous prices,” one trader in the region said.

Multiple sources shared similar sentiment, with cargo holders reluctant to offload units at lower levels and buyers remaining on the sidelines cautious of their stock levels.

“With the wide contango, participants are not actively looking to sell units,” a second trader told Fastmarkets.

But market participants also noted that the contango is not as wide as the past two weeks.

The London Metal Exchange cash/three-month spread was at $35.50-per-tonne contango at closing on February 6, narrowing from $39.09-per-tonne contango at the close on January 30.

Meanwhile, aluminium premiums in South Korea were unchanged amid low liquidity.

“There’s no large buying interest for aluminium, but the premium remains supported by tightness for available units,” a market participant said.

Fastmarkets assessed the aluminium P1020A premium, fca South Korea at $115-125 per tonne on Tuesday, unchanged on a weekly basis.

Fastmarkets assessed the aluminium P1020A premium, cif South Korea at $95-105 per tonne on Tuesday, also unchanged on the week.

European aluminium premiums well supported

European aluminium premiums remained well-supported during the week to Tuesday and were largely unchanged amid higher offers but low market liquidity.

Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam at $240-255 per tonne on Tuesday, unchanged from the previous week but up from $190-215 per tonne at the start of the year.

Offers continued to be reported above $255 per tonne in the week, with LME forward spreads in contango reducing selling pressure for some, and recent supply-side concerns noted across the region.

But subdued consumer demand and low levels of liquidity continued to cap further upside for now.

“There’s no good reason to lower your offer,” one trader in the region told Fastmarkets. “But equally, it’s difficult to achieve a higher premium.”

“Demand is flat, but I see that as relatively bullish,” a second trader said.

“You have ongoing issues in the Red Sea, as well as potential [EU] sanctions, so any upcoming macro events are only going to be supportive. I don’t see any consumers looking to push deliveries forward, so unless demand gets worse than present, any risk is to the upside,” the second trader added.

“There’s really not that much news this week,” a third trader said.

“We’re seeing the odd inquiry here and there, but nothing is booming and nothing is really that urgent,” the third trader added. “Saying that, I also see no reason why I would reduce my offer level, so it’s largely steady conditions for now.”

Premiums in the duty-unpaid market were also unchanged in the week to Tuesday.

Fastmarkets assessed the aluminium P1020A premium, in-whs dup Rotterdam at $170-180 per tonne on Tuesday, steady week on week.

In Italy, premiums were unchanged on low liquidity, while offers continued to be reported above $300 per tonne with participants noting tighter market conditions across Southern Europe.

Fastmarkets assessed the aluminium P1020A premium, fca dp Italy at $275-290 per tonne on Tuesday, unchanged from the previous week.

“In Italy, things are a little tighter,” one European consumer said. “There is more supply pressure there and people are offering higher based on increased costs to truck from Northern Europe to the South.”

Elsewhere, the Spanish market showed strength in the two weeks to Tuesday, with participants noting some supply concerns boosting sentiment in the region.

Fastmarkets assessed the aluminium P1020 premium, fca dp Spain at $270-295 per tonne on Tuesday, up from $260-270 per tonne two weeks earlier.

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