The Midwest premium for primary aluminum is seeing heavy
discounting as the backwardation on the London Metal
Exchange led some to offer material at lower levels to entice
consumer sales amid weak demand.
Everybody is trying to get rid of inventory, and with the
backwardation here theyre willing to give
discounts, one consumer said.
The free-market premium remains in a range of 10.5 to 11.5
cents per pound, with sources noting that the small
backwardation on the London Metal Exchange was forcing most
transactions toward the lower end.
The cash-to-three-month spread was in a 50 cent backwardation
Friday on the LME, with the cash aluminum contract ending the
official session at $2,078 per tonne (94.3 cents per pound)
while the three-month contract closed at $2,077.50 per tonne
(94.2 cents per pound).
The market has definitely turned soft. ...Consumers like
myself are either already full or have seasonality issues.
Everybody typically does less in December, a second
However, both consumers and sellers said they expect the market
to return to a contango in early 2013, noting that this would
bring a rise in the free-market premium.
The financing deals will still make sense once the
backwardation works out, and demand will come back in the first
quarter, according to the second consumer.
Our feeling is that the back will firm up next week to
about $30 to $40, but by the 28th (of December) there
wont be one, the first consumer added.
If we return to a steady contango market, the premiums
should come up well over 11 cents (per pound). Once the
holidays are over, people will start restocking, one
It will go up to 12.5 to 13 cents. ... it will move up
gradually, a second trader added.