US aluminium premiums continue to move higher amid wider global downtrend

Aluminium premiums in Europe and Japan continued to move lower in the week to Tuesday November 8, under pressure from weak consumer demand, while premiums in the United States bucked the downtrend for a second week despite uncertainty over the midterm elections there

  • US Midwest aluminium premium rises for the second consecutive week
  • Rotterdam premiums hit fresh 2022 lows on weak European demand
  • MJP premium also down on muted liquidity

US premium rises erratically in ‘inefficient’ market

The US Midwest aluminium premium rose again in the week to November 8, having risen the previous week for the first time in five months.

Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US at 19-22 cents per lb on Tuesday, up from 19.5-20.0 cents per lb on November 1.

A consumer sale was again reported at a premium of 22 cents per lb in the week to Tuesday, following several similar reports in the previous week. This time, however, the transaction well exceeded Fastmarkets’ minimum 100-tonne threshold for its P1020 premium assessment.

Fastmarkets understands the sale was not for ingot, which commands a greater premium than P1020 aluminium and comes as a ‘T-bar’ or ‘sow.’

Another sale was reported at a premium approaching 22 cents per lb and deals were hard at premiums of 20 and 21 cents.

Traders said they had raised their offers in anticipation of higher replacement costs, especially in 2023. First-quarter futures premiums for 2023 are already upwards of 22 cents per lb.

Even so, some producers have lowered their offers to consumers, with a wider range the result and with most participants of the view that is hard to estimate a range in what is now a seemingly illogical market.

“Nobody knows where the market is,” a veteran trader told Fastmarkets, adding, “the market is very inefficient!”

And the fact the US mid-term elections are taking place on the assessment day, November 8, is only adding to market uncertainty, according to some market participants.

“We need to watch the next few weeks with the holidays and the election results,” one major supplier source said.

Before November 1, the Midwest premium had essentially been in a slow decline from its all-time high, 40-cent mid-point, last seen on May 3. It had ticked up just once, by less than 1% on June 28, having undergone a 0.5 cent increase at the high end from 32.5-33.5 cents per lb in the previous assessment.

The US premium is assessed twice weekly, on Tuesday and Friday.

When it recently stabilized on October, 28 - for the first time in 14 assessments - many market participants said it had hit a bottom, prompting a second source to add that “nothing falls forever.”

European premiums hit fresh 2022 lows

European premiums continued to trend lower in the week to Tuesday, under further pressure from weak demand and high European inventories.

Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam at $250-270 per tonne on November 8, unchanged from Friday, November 4 but down from $260-290 per tonne a week earlier.

This is the lowest level for the premium since June 2021 and it is down 57% from the record high of $600-630 per tonne seen in May.

Market participants have continued to report reduced buying interest amid weak consumer demand and the negative economic backdrop.

“I have no concerns at all for supply in [the first quarter] of next year. Perhaps the second half is different when we look at the longer term, but nearby is a different story,” a European trader source said.

“Everyone has high stocks and people are postponing already-delayed orders until 2023,” the trader source added.

Unpaid premiums were also lower in the week to Tuesday.

Fastmarkets assessed the aluminium P1020A premium, in-whs dup Rotterdam at $190-210 per tonne on November 8, down from $200-220 per tonne the previous week and falling by 47% from $360-400 per tonne at the beginning of September.

But despite falling spot premiums, some market participants said there would be longer-term uncertainty, with concerns over 2023 supplies following recent European production cuts.

“There’s a small contango [on the LME] but it’s still not enough - although there is now less incentive to dump material,” a second European trader source said.

“Everyone is trying to take their position for next year, but it’s very variable. How quickly will demand return? How many units are really available in Europe? There’s not much more metal to be shipped from Asia in the warehouses,” the source added.

Elsewhere in Europe, the Italian market remained flat this week amid quiet market conditions.

Fastmarkets assessed the aluminium P1020A premium, fca dp Italy at $275-300 per tonne on Tuesday, unchanged week on week.

This was the first week since August that the premium had not fallen, having reached its lowest level since March 2021 last week.

Market participants told Fastmarkets that other European locations had become more attractive to ship to than Italy, partly due to lower freight rates, but also because of the high level of supplies already available in the Italian market.

MJP premium down

The main Japanese port (MJP) aluminium premium fell in the week to Tuesday amid largely muted buying interest.

Fastmarkets’ twice-weekly assessment of the aluminium P1020A (MJP) spot premium, cif Japan was $75-85 per tonne on Tuesday, down from $80-90 per tonne a week earlier.

High stock levels and slow downstream consumption continue to discourage market participants from procuring on a cif spot basis, while many are waiting for the conclusion of a potential ban being imposed on Russian metal supplies because of Russia’s invasion of Ukraine.

“People are not willing to carry many stocks approaching the end of the year,” a Singapore-based trader said, “The impact of any sanctions on Russian material will be [felt] indirectly.”

“The spot market is supposed to be largely stable and quiet during the fourth quarter, given the possible sanctions against Russian materials and slow demand,” a trader source in Japan told Fastmarkets.

“The number of spot tenders in the local market has also been decreasing,” the trader source added.

South Korean market remained stable during the session amid thin liquidity.

Fastmarkets assessed the aluminium P1020A premium, fca South Korea, at $100-115 per tonne on Tuesday, unchanged from the previous week.

The corresponding aluminium P1020A premium, cif South Korea, was assessed at $85-100 per tonne on Tuesday, also unchanged from a week earlier.

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