A severe shortage of available aluminum has pushed spot premiums to record highs in the U.S. marketplace.
Midwest spot premiums have gone up to between 7.5 and 8.5 cents per pound, with one trader even reporting transactions as high as 9.5 cents per pound. Business is no problem; people will pay to get the metal.
A shortage of free metal units is largely behind the racing premiums. The flow of metal does not seem to be there. When you need something spot it is hard to come by. There are a lot of customers that are short. According to metal sources, smelters continue to ship aluminum directly into LME-bonded warehouses in Detroit in exchange of incentives of as much as $145 per tonne, keeping new units from reaching the consumers directly.
The incentives have allowed LME warehouses in Detroit to acquire a critical mass of material with Detroit inventories now totaling 1,083,375 tonnes or almost a quarter of global LME aluminum inventory.
Also behind the shortage of material in the U.S. market is the strength of neighboring regions. Mexico and Latin America which have been running short due to production delays in Venezuela and roaring demand continue to buy material very aggressively.
There is not a lot of metal coming in here. Other parts of the world are more effective for swing units, so North America is being starved.
Excerpts from American Metal Market. April 15, 2011
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