U.S. Aluminum: Midwest Premium At 3.5-4c; Expected To Move Up

NEW YORK--The Midwest U.S. aluminum premium over London Metal Exchange cash prices was reported in a 3.5 to 4 cent-per-pound range Thursday but market players expect the premium to move higher over the coming months.

Traders and analysts said the premium for March is higher and closer to the 5 cent-per-pound level.

"Some are quoting above 5 cents," said one New York-based trader of the forward premium. "If the backwardation (of aluminum prices on the London Metal Exchange) persists then we could have the premium move up to even 8 cents in two months."

Premiums had been on a steady downward course over the past few months amid a lack of orders and sufficient supplies.

But market players contend that demand is picking up amid lower aluminum prices while inventories may be running low.

"We are seeing some turnaround in the extrusion market and for (primary grade aluminum)," said another trader. "Once the metal goes then the bubble will burst and we will see 5- to 5 1/2-cent premiums."

Meanwhile, LME cash aluminum was officially quoted at $2,725 to $2,730 per metric ton, or about $1.2358 to $1.2380 per pound.

Inventories of aluminum stored in LME warehouses rose 3,275 metric tons to 755,825 from Wednesday to Thursday.