CHICAGO (Dow Jones)--The U.S. Midwest prompt aluminum premium over London Metal Exchange cash prices was higher over the last week at around 4.75 cents to 5 cents per pound, the highest in over a year, and will likely continue to rise in upcoming weeks, analysts say.
This is up from a range of around 4 to 4.5 cents in early June, traders say.
Jorge Vazquez, aluminum analyst with Harbor Intelligence, quoted the premium in a range from 4.75 to 5.10 cents, but said most business is being done around the 5-cent level. A trader listed a range of 4.75 to 5 cents.
Vazquez said the market is tight as some producers are short of the metal to fulfill customers and there is no spot availability for the metal.
Also, though
LME inventory levels are high at around 4.3 million tons, Vazquez said about 80% of that inventory is not accessible, instead tied up in financing and warehouse deals. "It's like they are nonexistent," Vazquez said.
These factors, coupled with an underlying growth in U.S. demand, have pushed the Midwest premium higher, Vazquez said.
A Barclays Capital research note said consumers are buying on a "hand to mouth basis," and
LME stocks are much more limited than what the high level appears to suggest. The report said the current premium range is the highest since May 2008.
Physical premiums will likely continue to rise, according to the Barclays research note.
LME cash aluminum was officially quoted at $1,641 to $1,642 per metric ton Friday, or about 74.43 cents to 74.48 cents per pound.
Inventories of aluminum stored in
LME warehouses fell 2,850 metric tons to 4,368,925 from Thursday to Friday. The total is up from 4,269,850 metric tons one week ago.
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