Midwest aluminum premiums could fall to as low as 10 cents per pound by this summer as current record-high premiums attract imports and threaten to splatter red ink on cash-and-carry deals, analysts said.
The drop would be due, in part, to premiums that have skyrocketing to 20.75 cents per pound from 12 cents in a matter of weeks – and that are now attracting metal to the United States ordinarily sold in Europe, Timothy Hayes, principal of New York-based Lawrence Capital Management Inc., said in a research note.
Premiums were driven up in a classical short squeeze in the physical market, analysts at New York-based Bank of America Merrill Lynch said in a research note.
With new LME rules kicking in April 1st and more metal delivered out of warehouse effective August 1st, tightness in the physical market should subside and premiums should move lower, the analysts said.
Excerpts from American Metal Market February 7, 2014
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