Aluminium premiums poised for record highs as Europe's economy improves

European aluminium consumers are expected to pay record amounts to get hold of physical metal in the second half of 2014, as an improved economic backdrop triggers extra demand.

Persistent appetite for financing deals and logjams in releasing aluminium from storage are also seen supporting the outlook for premiums, as the LME battles to push-through reforms aimed at freeing-up metal stuck in queues at its warehouses.

Aluminium premiums in Europe are already trading at around record high levels of $350-380 a tonne for duty-paid material. The premium, paid over the London Metal Exchange (LME) cash price, covers the cost of freight and insurance, and reflects regional demand and supply.

At current levels premiums are up 30 percent since the start of this year, and traders said a recovery in European demand could spur consumers to replenish material for the second half.

"Premiums are stable in Europe, and I see them going up in the second half of 2014," a Europe-based aluminium trader said.

"In northern Europe the recovery is gathering speed. There is a more positive outlook for the economy so we are likely to see more consumer buying."

German economic growth doubled to the fastest rate in three years in the first three months of 2014, with emerging European economies also flourishing, although in France economic growth stalled in the first quarter.