Reuters reported that the US Midwest aluminum premium paid above the London Metal Exchange cash price remained at elevated levels in early November as an inability to gain access to warehouse material continued to stifle domestic spot business flows.
Midwest aluminum premiums were seen in a range from 6.35 to 6.5 cents down a few ticks from summer when they stood firmly at 6.5 cents but well above the 5.5 cent level at the end of 2009.
Dealers said that extended lead times for withdrawal of the lightweight metal from LME registered warehouses in Detroit helped to underpin the rise in premiums this year, as logistical restraints caused significant delays in deliveries of prompt material.
One said that the warehouses are definitely tied up. There are still lead times out all the way to the middle of February at this point in Detroit, so right now the spot business that has typically been there month to month has slowed quite a bit. A staggering jump in canceled aluminum warrants in Detroit only added to the bottlenecks.
Traders were caught off guard by a massive 100,000 tonne rise in canceled warrants back in September which suggested that the material would leave storage for future delivery.
A Southeastern trader said that if you cancel a warrant right now, you don't get it until the end of February. It's not clear to us who did it and why they did it it's likely not going to a customer. We think it might actually be another warehousing company doing it.
As much as 75% of this stockpile is tied up in financing deals which allow banks to buy nearby material from a producer, sell it forward at a profit and strike a warehouse deal to store it cheaply for an extended period.
Traders also cited an LME rule that requires registered warehouses to deliver 1,500 tonnes of aluminum per location per day as another reason for the slowdown in business.
The first dealer said that material is tight in the sense that you cannot go and get it out of the warehouse. The financing deals and the LME limit rule that does not seem to be changing is definitely going to keep things tight.
（Sourced from Reuters）
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