Barclays sees several factors supporting U.S. Midwest aluminum premiums, which have risen to around 9 cents a pound in the early part of the week, just short of the record of 9.5 cents hit in May 2011.
“The supply-demand fundamentals in the North American market have certainly tightened since the beginning of the year,” bank added.
Demand has been strong, as reflected in Aluminum Association data showing new semis orders increasing 12% year-on-year in February.
“Contrasted with supply disruptions at Rio Tinto Alcan's Canadian aluminum smelters, there has certainly been a tightening effect in underlying regional market fundamentals, which should be supportive of physical premia for metal,” Barclays continued.
“There is, however, a firm case for stating that irrespective of this, physical premiums have also been supported by a renewed vigor in terms of appetite for financing deals (given favorable time spreads so far in 2012) combined with the significant delays in the delivery of material at LME warehouses due to the current record canceled warrant levels,” Barclays concluded.
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