Europe’s aluminium premium stays elevated despite discounted deals

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Europe’s aluminium premium has climbed to a near four-year high, but buyers are resisting elevated levels, with at least one deal reportedly struck below the benchmark. Mercuria, a global commodities trader, sold metal at a discount of USD 10 to USD 15 per tonne below Fastmarkets’ assessed premium, reflecting weak buying interest.

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The duty-paid premium for aluminium in Europe rose to around USD 587.50 per tonne in early April amid concerns that escalating tensions in the Middle East could disrupt supply chains. However, deals are increasingly being negotiated below benchmark levels as sellers prioritise liquidity.

In Europe, buyers usually pay the LME price plus a regional premium, one trader mentioned, noting that the premium covers logistics, financing, and delivery costs.

The aluminium market has shifted into backwardation, where near-term prices exceed those for future delivery. A market participant said that sellers were effectively holding metal that was worth more in the present than in the future, which was prompting them to offer discounts to move material quickly.

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Fastmarkets noted that single off-benchmark trades can happen when markets are fragmented. While elevated premiums typically indicate tight supply, backwardation is encouraging faster turnover and uneven pricing across the value chain.

European countries still rely heavily on importing aluminium and are therefore vulnerable to supply disruptions. Any perceived risk, especially those originating from the Middle East, could lead to a quick increase in premiums (i.e., price spikes) and greater volatility in the entire European aluminium market.