US primary aluminum market sees solid demand, traders lift premiums

Premiums for P1020 aluminum have continued strengthening this week, as traders reported more deals to consumers and claimed close-freight consumers were not getting their previous discounts.

The Platts premium rose another 10 points Tuesday over LME cash, moving to 8.9 cents/lb from 8.8 cents last week.

Multiple deals were heard in the market Tuesday, with traders reporting selling to two consumers in the Southeast at a premium of 9.25 cents/lb delivered and a 7.75 cents FOT Southeast. Other traders and producers reported deals last week at a premium of 9-9.5 cents last week.

One consumer said P1020 was bought Monday at the 8.8-cent level from a close freight location, while others said they were hearing deals being done between 8.7-9.2 cents.

Market participants have said that the small increase in demand from extruders and mills and the fact that producers are unable to sell has caused traders to keep raising their prices.

"Producers aren't selling to the market and if consumers can't buy from them, then the traders should be pushing the premium higher," one trader said Tuesday. "That's what you do -- if people keep buying you keep raising your numbers."

The trader said he heard consumers saying they could buy at a 0.25-0.5-cent discount, but he said there is little selling at that level for large volumes.

Some consumers said they were still getting those deals, but with more difficulty. One said he was offered Midwest with no discount from one seller, but was able to get half a cent discount from someone else.

"I don't want to pay flat with the premium where it is," he said.

Another consumer said he was able to buy last week at a premium of 8.75 cents, delivered Canada, when the Platts premium was at the same level, but said he heard there were 9-cent deals in the market.

Meanwhile, another trader said he heard consumers discussing offers in the market as high as 10 cents. "Nothing was concluded," he said, adding that he saw no reason for sellers to discount metal unless interest rates go up or the contango gets narrower. "As long as demand remains where it is, there is no reason for the premium to come down."