Tight supply sends Rotterdam aluminium premium to record high
Tight availability of metal and firm demand continued to drive aluminium premiums higher in the week to Tuesday April 19, with the duty-unpaid premium in Rotterdam reaching a new high, while the US Midwest premium held steady at its highest ever.
• Tight supply sends Rotterdam dup premium to new all-time high
• US Midwest premiums stable at record highs
• MJP market stable but domestic market active
• Brazilian premiums rise on delayed catch-up to global uptrend, higher demand
Supply constraints support European premiums
European aluminium premiums remained well supported during the week, with duty-unpaid premiums in Rotterdam hitting a fresh high of $500 per tonne.
Fastmarkets assessed the aluminium P1020A premium, in-whs dup Rotterdam at $470-500 per tonne on Tuesday, the highest ever for the grade. This is up from the previous high of $470-490 per tonne a week earlier.
Despite relatively muted liquidity over recent pricing sessions, tight supply, high energy costs and a deal reported at $500 per tonne pushed the unpaid premium higher during the week.
“Everything still feels very tight and it’s hard to get hold of material nearby,” one trader in the region said.
“If you ask for a time swap, no one can do it. People can’t offer you very much nearby. There are units arriving in the summer but [the market] is tight and premiums are showing no signs of weakening,” the trader added.
London Metal Exchange warehouse stock continued to be drawn down over the week and globally inventory levels most recently stood at 603,650 tonnes, down by 1.17% from 610,775 tonnes a week earlier.
Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam at $590-620 per tonne on Tuesday, unchanged week on week.
Liquidity was low during the week due to extended European holidays and limited availability of units, which kept the premium steady. On the other hand, several offers were reported higher, at $630 per tonne.
“It’s been a bit quieter because of the break in Europe. I think consumers will be back this week and will be putting in enquiries for the next few months,” a second European trader said.
“The interest is still there, and the market is still tight, but most people wanted to wait until after the holidays to conclude.”
A third trader in the region added: “It’s quiet, but it’s cyclical and a lot of consumers are licking their wounds from the high premiums at the start of the year.”
“We will likely see things pick back up again over the next month, but nearby availability is still low,” the trader added.
Beyond Rotterdam, Fastmarkets assessed the aluminium P1020A premium, fca dp Italy at $620-650 per tonne on Tuesday, also flat week on week.
US premium steady on holiday lull
The benchmark aluminium premium in the United States held at its all-time high in the week to Tuesday, with no spot deals reported.
Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US at 39-41 cents per lb on Tuesday, unchanged from April 12 and still at its highest since Fastmarkets’ assessment began in January 2003.
The assessment week included two days when the LME was closed for Easter holidays - on Friday April 15 and on Monday April 18.
Most sources expected the premium range to hold steady once trading resumes.
“There’s no let-up here,” one trader said. “There’s not a lot of supply and no one’s buying Russian material.”
Since Russia - the world’s second-biggest aluminium exporter - invaded Ukraine in February, all of Fastmarkets’ US aluminium premium assessments have risen to their highest levels on fears that the country might re-impose sanctions on aluminium imported from Russia.
Aluminium was the strongest performer amid a general rise of base metals prices on the LME when trading resumed on Tuesday. The benchmark three-month price gained 1.7% to $3,342 per tonne on Tuesday morning, from $3,285.50 per tonne at the close of trading on Thursday.
MJP market quiet but domestic market active
The Japanese aluminium premium remained unchanged in the past week despite an active domestic market.
Fastmarkets assessed the twice-weekly aluminium P1020A main Japanese ports (MJP) spot premium, cif Japan at $150-170 per tonne on Tuesday, unchanged since April 12.
One offer for an undisclosed tonnage was quoted at $170-180 per tonne, but no transaction was concluded.
Sellers kept offers firm and were reluctant to give discounts amid the supply tightness, although demand remained subdued.
Traders have been moving Asian stock to the European market due to the regional price gap, leading to tight availability.
Meanwhile, Japan’s domestic market was reported to be active.
“Domestic stock is sufficient and thus we have done some deals, but in contrast, the seaborne market is pretty quiet,” a Japanese trader said.
“Partly because the comparatively weak demand here is also, in turn, pushing traders to draw volumes away to a red-hot Western market,” the trader added.
Additionally, exports of finished aluminium products from China that had been putting pressure on other Asian markets slowed down in April due to the logistical snag from Covid-19 lockdowns in China, sources told Fastmarkets.
Market sources said South Korea, Vietnam and Thailand are among the main importers of such products.
A trader in South Korea said a lot of these shipments flooded the Korean market in March, but now it seems like they are “no longer coming.”
Like Japan, the South Korean market was also quiet during the week.
Fastmarkets assessed the aluminium P1020A premium, fca South Korea at $150-180 per tonne on Tuesday, unchanged week on week.
Fastmarkets assessed the aluminium P1020A premium, cif South Korea at $135-165 per tonne on Tuesday, also unchanged week on week.
Brazilian premiums tick up on global uptrend
In Brazil, spot market interest continued to be directed mainly toward domestic supply, with local producers able to offer at lower prices than imports. Premiums continued to improve on both a cif and delivered basis amid recovering demand and higher levels seen in Europe, for example.
Fastmarkets’ assessment of the aluminium P1020A premium, cif dup Brazilian main ports was $500-520 per tonne on Tuesday, up by $20 per tonne from $480-500 per tonne a fortnight earlier.
Although a few offers were still heard at $480-500 per tonne, those were the minority. Most sources reported the assessed range as the premium floor for the moment, which presents an opportunity for some.
“I will be able to secure some volumes at these premiums, but that probably won’t still be true by the end of the week,” a Brazilian trader said. “The numbers would probably be outdated by then.”
But buyers did not show any real interest for cargoes at those levels.
Domestic producers are able to offer more competitive premiums.
Fastmarkets assessed the aluminium P1020A premium, delivered São Paulo region at $480-540 per tonne on Tuesday, a $10-per-tonne increase on the bottom end from $470-540 per tonne on April 5.
Some sales of domestic material to the São Paulo region were heard at $480 per tonne. One trader said he heard that even $470 per tonne might be achievable.
Meanwhile, other states got offers as high as $510 per tonne, according to market participants.
Reports of stockpiled imports at bonded warehouses have faded in recent months, but should foreign material be offered on a delivered basis, market participants indicated that premiums would likely be at $540-560 per tonne.