European physical aluminium: Duty-paid premiums rally higher

Premiums for duty-paid aluminium ingot moved to extraordinarily high levels this week, with consumers still scrambling to buy up available spot tonnages. Market sources agreed that some players were even paying the equivalent of the unpaid premium plus the 6% import duty to convert material. The Platts Good Western duty-paid premium increased to $170-200/mt this week, bouncing up on a flurry of sky-high deals. Unlike last week when offers of $180-200/mt were just being bandied around and there were very few actual deals heard done, this week producer and trader sources said premiums levels had definitely breached the $200/mt mark, with some buyers even paying $230/mt for material.

"Due to the current tightness of duty-paid, some of the big names are buying unpaid and paying the 6% duty on top--which brings the level up to $230/mt," said a European trader source, adding that some buyers could even be pushed to $250/mt for small tonnages. The trader said that duty-paid was buying and selling in a wide $150-250/mt range--depending on how soon it was needed. "People are paying these levels for the whole of next year, but it is more expensive nearby," he said. A producer-buyer source agreed that people were paying the duty to convert unpaid in to paid: "If you are willing to pay for the material you can get it." He said there was uncertainty over what the market would be like in January, but at the moment, the "swing volume is very low--it takes very small tonnages to flip the market around." A UK-based trader said of current duty-paid levels: "These are the highest I have never seen. It's phenomenal really."

A second producer source said: "We have not sold anything below $200/mt. People are paying $230-240/mt--there are still shorts around." He said nearby premiums were at $200-230/mt while for 2007 the range was $190-220/mt. This is a considerable jump from the $125/mt contract level discussed during an industry conference in Moscow during September and the $140/mt level offered during LME Week in October. "I have never seen paid move this quickly," the producer source said. Duty-unpaid premiums were heard relatively steady this week, with the Platts Good Western unpaid premium unchanged at $63-70/mt plus LME cash. The producer buyer said he had sold unpaid at $70-75/mt this week, while a consumer said levels were steady at $60-65/mt. The European trader however, said unpaid had picked up considerably and was trading easily at $85-90/mt. A London trader said he had sold "several thousand tonnes" at $70/mt on Wednesday, and noted that some players were trying to talk the market higher.