The U.S. Midwest prompt aluminium premium over London Metal Exchange cash prices has continued to fall over the last week, with traders now putting the range at 3.5 to 4 cents.
A week ago, they had listed a band of roughly 4.5 cents to a little below 4 cents.
"It's certainly soft," said one trader. "There is plenty of material available. Both producers and consumers are selling material back into the market. So we are seeing premiums below 4 cents.
"Depending on whether or not we get a backwardation, that premium could go down even lower."
Some of the decline was blamed on a slowing U.S. housing market.
"Housing is off significantly. This is making the extrusion market soft. And once the extrusion market is soft, that means less people buy billet. That means producers have more ingot available to sell," said the trader.
"We're talking about a fairly soft demand picture, at least for the near term right now. It seems like everyone has enough inventory to last until the first few months of next year."
As was the case a year ago, observers also cited year-end de-stocking.
"It's the same scenario," said one trader. "Nothing significant changed. That's going to be the story for December. If the de-stocking slows down, I think the premium will stabilize. Otherwise, it may continue to go lower."
Another trader commented that de-stocking is especially apparent among publicly traded companies.
"Obviously, nobody wants to hold stock over year-end," he said.
LME cash aluminium was officially quoted at $2,775 to $2,776 per metric ton Wednesday, or about $1.2585 to $1.2590 per pound.
Inventories of aluminium stored in LME warehouses fell 425 metric tons to 677,725 from Tuesday to Wednesday. The total is down from 681,200 metric tons one week ago
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