China Aluminium Network
U.S. aluminum premiums climb as demand picks up
Edited by : AL CIRCLE
2 min read
The U.S. primary aluminum market is seeing a surprisingly strong burst in spot purchases at the start of the quarter, with supplier order books filling up even as volatile financial markets dispel recovery hopes.
The demand pickup has caught physical market players by surprise, many of whom expected the seasonally slower fourth quarter to close out 2011 with a whimper. So far, it is shaping up to be a busier-than-normal quarter.
“For the next couple of months, we are basically sold out,” said one Midwest aluminum manufacturer and distributor. “The automotive sector is good, heavy truck is good, the rail industry is busy … the casting side of the business is actually pretty busy.”
A similar upbeat market view came from Alcoa Inc’s chief executive earlier this month, after the largest U.S. aluminum producer reported higher third quarter net income and revenue from a year ago.
Even so, customers have been limiting their risk by operating on a hand-to-mouth basis in order to avoid being caught with too much inventory at year’s end if economic conditions take a turn for the worse or international aluminum prices deteriorate further.
In Detroit, more than 1 million tonnes of the metal sits in storage, but given the ongoing delivery bottlenecks any order filled today will take about five months before it is in the customer’s hands.
“If the metal is that hard to get out of the warehouse, you better be sure you are getting paid for what you are doing,” the manufacturer said.
With healthier underlying demand for the metal, longer lead times at the warehouses, and production restarts in North America already in effect, the Midwest premium will revisit its all-time high sooner rather than later.
“We continue to see elements present in the industry that are consistent with the idea of a new high in the Midwest premium by the first quarter of next year,” said Jorge Vazquez, founder and senior vice president with Harbor Intelligence.
“No growth in aluminum output plus growing demand are leading us to expect record-high premiums by the first quarter of next year, at levels above 10 cents per lb.”
The demand pickup has caught physical market players by surprise, many of whom expected the seasonally slower fourth quarter to close out 2011 with a whimper. So far, it is shaping up to be a busier-than-normal quarter.
“For the next couple of months, we are basically sold out,” said one Midwest aluminum manufacturer and distributor. “The automotive sector is good, heavy truck is good, the rail industry is busy … the casting side of the business is actually pretty busy.”
A similar upbeat market view came from Alcoa Inc’s chief executive earlier this month, after the largest U.S. aluminum producer reported higher third quarter net income and revenue from a year ago.
Even so, customers have been limiting their risk by operating on a hand-to-mouth basis in order to avoid being caught with too much inventory at year’s end if economic conditions take a turn for the worse or international aluminum prices deteriorate further.
In Detroit, more than 1 million tonnes of the metal sits in storage, but given the ongoing delivery bottlenecks any order filled today will take about five months before it is in the customer’s hands.
“If the metal is that hard to get out of the warehouse, you better be sure you are getting paid for what you are doing,” the manufacturer said.
With healthier underlying demand for the metal, longer lead times at the warehouses, and production restarts in North America already in effect, the Midwest premium will revisit its all-time high sooner rather than later.
“We continue to see elements present in the industry that are consistent with the idea of a new high in the Midwest premium by the first quarter of next year,” said Jorge Vazquez, founder and senior vice president with Harbor Intelligence.
“No growth in aluminum output plus growing demand are leading us to expect record-high premiums by the first quarter of next year, at levels above 10 cents per lb.”
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