US Midwest aluminium premium turns upward after falling since May

The US Midwest aluminium premium for P1020A material rose for the first time in 36 assessments on Tuesday November 1, with most US market participants expecting there to be further upside

The premium was stable in the previous assessment, on October 28, for the first time in 14 assessments, prompting many to declare that it had hit the market bottom.

The premium remained less than half of what it was on May 3 this year, when it began to decline from a 19-year high.

Fastmarkets’ assessed the aluminium P1020A premium, ddp Midwest US at 19.50-20.00 cents per lb on Tuesday, up from 19.00-20.00 cents per lb on October 28.

The current mid-point of 19.75 cents per lb was down from the mid-point of 40 cents per lb that prevailed between April 8 and May 3.

Most US aluminium market participants pay attention to the P1020A premium because it affects prices for aluminium scrap, alloys, and valued-added products such as extrusions. Overseas aluminium market participants also watch the premium for the best global arbitrage possibilities for P1020A material.

Spot activity increases, future premiums higher
After weeks without any US spot-market activity having been reported, multiple deals were reported to Fastmarkets this week – and at premiums higher than the prevailing range.

Several were disregarded because they did not meet the minimum volume of 100 tonnes that Fastmarkets factors into its assessments for this commodity. Others were beyond Fastmarkets’ 30-day spot window for P1020A, but an uptrend seemed evident.

“We had several sales of a few truckloads for November and December,” one trader said.

“The futures premiums are higher – 22 cents and 22.25 cents per lb for the first quarter,” the source said. “I think the premium is moving into a higher range and we’re not selling [at prices lower than] 20 cents [per lb] now.”

A second trader source echoed the first, having heard of spot business already done at 22 cents per lb, but Fastmarkets understands that was for a small tonnage.

Meanwhile, a buyer who agreed that the premium had at least reached a plateau on Friday said: “Only the bravest among us are willing to buy metal right now.”

He added: “I think this is the bottom for the premium. It’s held in a tug-of-war between weak economic conditions on one side and low inventories on the other.”

This week a second buyer said: “I heard over and over again at LME Week [October 24-28] that the current premium is below replacement costs.”

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