Europe aluminium premiums remain steady at record highs

Premiums paid in Europe for releasing aluminium from storage have remained steady at record levels this month. Traders said they may be contained by new rules of London Metal Exchange (LME aimed at cutting wait-times aluminium.

Premiums competed to record highs early in the month of February, above 30% from this year beginning, as the smelter shutdowns and financing deals squeezed the aluminium availability in the spot market.

European prices for duty-paid aluminium have remained high since then, around $360 a tonne above LME cash aluminium price , although below levels in North America, where Midwest aluminium premiums rose to a record 20.5 cents/lb ($452/tonne).

"Premiums rose very quickly and took a lot of people by surprise. The magnitude of the rise was very surprising. But now momentum is slowing," a Europe-based trader said.

Traders said premiums were stabilising as there were doubts regarding the scope for further significant aluminium gains ahead of the new LME rules. It also intended to reduce prolonged delays in getting access to metal from LME-approved warehouses.

Last year LME announced a tougher warehouse policy to cut the queues for aluminium delivery to a maximum of 50 days from over a year in few cases. The rules will become effective on April 1. Most of the estimated global aluminium stocks (around 10-15 tonnes) are stuck in financing deals and this take advantage of the low interest rates as well as the metal’s contango structure.