The cost at which physical aluminium is available in European spot market made a record rise this week as less supply forced the users to struggle for the metal, said traders on Tuesday.

Premiums, paid over LME cash prices, have been trading at $380- $400 per ton in this week for duty-paid material, said traders. Continous appetite for financing deals supported by by aluminium supplies and logjams in the metal released from storage have tightened the supplies of the metal. The LME still fights to push through the reforms that are mainly aimed at freeing up aluminium stuck in warehouses’ long queues.

Traders are of the view that consumers were purchasing small volumes of the metal to meet the immediate needs. They are not taking the risk of buying large quantities as there remains the uncertainty about the outlook for the metal prices.

"The fact is that people are living hand-to-mouth in anticipation of this (rise in premiums) disappearing. But the way things are at the moment, I don't see that happening," a physical aluminium trader said.

At current levels, the premiums have been up by 30% since this year’s beginning and traders are of the view a recovery in European demand could urge the consumers to renew stocks for 2nd quarter.

The market will be keeping an eye on how LME proceeds with the proposed reforms to its warehousing rules, which were ruined by a legal setback days before it came into force. Last week, the LME said it had the permission to appeal against the law that stopped the proposed reform. Traders said if the reforms could go ahead, it would put a downward pressure on the premiums.