US Aluminum: MW Premium Remains Firm Around 5 To 5.5 Cents

The U.S. Midwest prompt aluminum premium over London Metal Exchange cash prices has been around 5 to 5.5 cents in recent days, traders said. This is in line with a range of 4.8 to 5.5 cents in late July. A couple of traders described the premium as holding around current levels after rising earlier in the summer. "It's holding pretty firm," said one trader, listing a range of 5 to 5.25 cents. "With the contango on the LME, there is no reason to dump metal. So people are holding onto their metal until you pay a premium. And if you don't pay a premium, you don't get metal." He described demand as spotty, but with the market quiet during the late-summer period. "It's pretty firm because most of the metal has been captured in LME warehouses and it's not that easy to get your hands on it," said another trader, putting the premium in a 5- to 5.5-cent range. While this aluminum can be obtained, there is a lengthy process by which to get it out, the contact said. Also, premiums asked for specific warrants have been high. One trader said he looks for the premium to hold up around current levels, particularly if there are other events such as a recent accident at a Russian hydro-electric plant that could curb aluminum output there. Still, traders said, this event has not had a major impact on the premium yet, with the market watching to see if energy necessary for aluminum production will come from other plants instead. "It could [have an impact] down the road," said one trader. "Right now, I think there is still enough metal around for it to not have such a big effect." Overall, the key at the moment is that many industrial users have kept inventories low, said another trader. "If business does pick up, which usually happens in September anyway, then I think you could see a little tightness on a short-term basis." LME cash aluminum was officially quoted at $1,904 to $1,905 per metric ton Wednesday, or about 86.36 cents to 86.41 cents per pound. Inventories of aluminum stored in LME warehouses rose 52,525 metric tons to 4,624,575 from Tuesday to Wednesday. The total is up from 4,566,175 metric tons one week ago. -By Allen Sykora, Dow Jones Newswires; 541-318-8765; allen.sykora@dowjones.com