London (Platts)
Spot and contract premiums, both in the duty-paid and unpaid sectors, for Good Western aluminium ingot sashayed higher in Europe this week, pushed higher by bullish demand sentiment, booming economic conditions and the lack of easily available spot supply, producers, consumers and traders said Wednesday.
And London Metal Exchange Week in London provided the perfect platform for producers, hungry for higher numbers, to fuel the premium fire for 2007 contracts. "Producers want to take advantage of the high spot numbers and are trying to push them into next year," said one producer buyer, adding that "expectations are much higher now."
The Platts Good Western premium inched higher at the lower end of its range to $130-135/mt plus the London Metal Exchange cash price, in-warehouse Rotterdam, from $128-135/mt a week earlier. And while one producer source said deal levels had reached $140-145/mt for both spot and Q1 2007 contracts, other market sources agreed that around $135/mt was more reflective of the current market level.
A European consumer said: "I don't see why duty-paid premiums would come down. Demand in Europe is strong, the economy is booming." He added that the only dampener on premiums might be the slowing of the US economy, but this would only impact the market later in 2007. "There will be no huge change from the supply side," he said, noting that the biggest hinderance in increasing production capacity in Europe was the cost of power.
He said many of the long-term power contracts enjoyed by smelters in Europe were coming to an end and producers were scrambling to secure favorable megawatt-hour costs. "There has been a loss of duty-paid production in Europe due to smelter closures and there is no new capacity due to come on line there," the consumer said.
The consumer said during LME Week, market players had been negotiating to secure their volumes for next year, while premiums might only be finalized quarterly. "But I am not going to argue over $5-10/mt," he said.
He said the prices being talked for 2007 contracts were $135/mt for duty-paid, on an in-warehouse Rotterdam basis, plus LME cash.
A producer source said spot premiums for duty-paid had climbed even higher this week with material offered at $140-145/mt plus LME cash. He added that contracts for the first quarter next year were in line with this.
"Underlying demand is strong...extruders are buying a lot," he said, adding that there was very good duty-paid demand for the first half of next year.
"On the spot market people were screaming for material," he said, adding:"Far forward the market is not too tight, but for the first six to nine months it is." He said in Europe there were quite a few shorts around at the moment."Even in Asia spot demand is picking up," he said. "Overall across the aluminium sector the economic climate is good, even for the cable guys.
Combined with an environment which was already in deficit [this is all positive for industry demand.]"
GOOD WESTERN UNPAID PREMIUMS STEADY AROUND $63-68/MT PLUS LME CASH The Platts premium for Good Western unpaid was steady at $63-68/mt, on an in-warehouse Rotterdam basis, plus LME cash. A producer source said spot unpaid was at $65-70/mt, same basis, while on contract it was $65/mt for Q1 next year. A London-based trader said he was offered unpaid at $75/mt, but felt this was "a bit steep" and the market was more likely around $65/mt.The consumer agreed that unpaid was around $65/mt, as was Russian material, both on the same basis. An Eastern European market source said A7E unpaid, in-warehouse Rotterdam, was in the low $60s plus LME cash. "But there is not too much to report on contracts for next year; it is still a bit early," he said, adding that consumers did not seem to be booking much more material than last year. He added that there had been "a bi
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