US Midwest aluminium premium nears possible ‘tipping point’ of 40 cents per lb

Despite the belief in some quarters that the benchmark aluminium premium in the United States had finally peaked, the P1020 premium rose to yet another all-time high on Friday March 11, approaching 40 cents per lb

Those who were bearish about the highly influential Midwest premium pointed to falling prices on the London Metal Exchange since the start of the week, which had driven US aluminium scrap market prices lower by Thursday.

But most market sources did not see that as an early indicator of a decline in the primary aluminium market.

A deal for a large volume of material at 39.3 cents per lb was heard for P1020, which helped to drive up the primary aluminium price. Additionally, some big sellers of P1020 have reported abnormally high spot demand because of continued concerns about supply out of Russia.

Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US, at 38.00-39.50 cents per lb on Friday, up from 38.00-38.50 cents per lb on March 8.

That was the eighth all-time high in the past nine assessments of the Midwest premium (MWP), which began to break previous records on February 8 because of anticipated supply concerns.

These concerns strengthened after Russia, the world’s second-largest aluminium supplier, invaded Ukraine on February 24.

The aluminium market was “ridiculously volatile” at the start of this week, according to Fastmarkets’ sources, but by Friday most metals, including aluminium, had subsided from their record highs.

All US aluminium premiums and prices for most alloys were already at record highs on March 4.

And all US aluminium premiums set new all-time highs on March 11: the aluminum 6063 extrusion billet premium, delivered Midwest US, and the premiums on top of the MWP for aluminium extrusion billet and primary foundry alloy - aluminium primary foundry alloy silicon 7 ingot/T-bar premium, dlvd dup over P1020A Midwest US.

This came while prices for aluminium alloys, even those made mostly from scrap but some from primary metal, rose across the board on March 10.

“I’m not sure the Midwest premium is maxed-out yet,” one secondary alloy maker said, who purchases both primary aluminium and scrap.

On the same day, all prices for mill-grade aluminium scrap, which is purer so tied more closely to the MWP, declined in Fastmarkets’ assessments.

Fastmarkets’ assessment of the aluminium scrap segregated low copper alloy clips 5052, mills speciality consumers’ buying price, fob shipping point US, was $1.74-1.79 per lb on Thursday, down by 4.85% from $1.84-1.87 per lb on March 3.

Also on Thursday, the benchmark aluminium 3 months LME Daily Official price declined to $3,530-3,531 per tonne, from $3,533-3,535 per tonne on Wednesday, and from Monday’s peak of $3,966-3,968 per tonne.

“Demand destruction is becoming likely at these prices,” one US trader said on Monday. “The LME [intraday aluminium trade] went up to more than $4,000 per tonne today.”

To keep up with aluminium price trends throughout 2022, visit our base metals page.

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