Winter Park, Florida 11/05/2016 - Suppliers of primary aluminium to the United States have seen an uptick in spot demand due to lower London Metal Exchange prices but higher premiums remain elusive.
Three-month LME aluminium is currently at $1,566 per tonne, which is down about seven percent from the end of April. But there were signs stabilisation today with prices up $16 for the session.
"This might be a good price to jump in if you're a consumer," a US trader said. "I think there were some people who were waiting for a price correction before ordering more material [for the third quarter]."
But even with this fresh demand, the US Midwest premium held this week at 7.75-8.0 cents per pound in what is still very much a buyers' market due to the presence of large warehouse stocks and imports.
"We're getting more enquiries," noted a US trader. "People are considering topping off at these lower prices but they're not willing to pay higher premiums. We will move some decent volumes over the next couple weeks but I can't see premiums increasing in any meaningful way."
In trade data, aluminium imports of ingot, scrap and mill products into the US and Canada (excluding cross-border trade) totalled 708 million pounds (321,000 tonnes) in March, up 10.3 percent year-on-year, according to the Aluminum Association.
Through the first three months of 2016, total imports were up 8.4 percent to 1.791 billion pounds (812,000 tonnes) while exports were up just 1.3 percent to 1,433 billion pounds (650,000 tonnes).
"There's still a lot of metal in the ports and more is coming from the Middle East and Russia. Demand is good but even so there's plenty available," a consumer said.
In the futures market, the forward curve for the CME Group's Aluminum MW US Transaction Premium (AUP) contract remains remarkably flat, suggesting that premium could remain stable for the rest of 2016.
The AUP May contract was last at 7.813 cents per pound while every month out to June 2017 was at 7.75 cents, according to CME data.
Nevertheless, the US still has some of the best fundamentals due to robust automotive, aerospace and building and construction markets.
Ford Motor Co. recently reported that its US sales increased four percent to 231,316 units in April. But of particular note, its SUV sales totalled 65,474 vehicles last month - the best April in company history.
Strong sales of the aluminium-bodied Ford F-150 helped to lift F-Series deliveries by 13 percent to 70,774 trucks sold. This is the second month in a row F-Series surpassed 70,000 sales, marking the best April performance in 11 years.
Meanwhile, the annual rate of US construction spending in March totalled an estimated $1.137 trillion, seasonally adjusted, up eight percent over the March 2015 estimate of $1.052 trillion, according to the Department of Commerce.
Through March, construction spending amounted to $240.4 billion, 9.1 percent above the same period in 2015.
In industry specific data, the annual rate of US primary aluminum production totalled just 1.06 million tonnes in February, a drop of 37.0 percent year-on-year, according to the Aluminium Association.
Smelting in the US has become unprofitable due to a strong dollar and high energy costs. Century and Alcoa have announced sizeable cuts, while Noranda has filed for Chapter 11 bankruptcy and closed the last potline in New Madrid, Missouri.
This year, the US will consume more than 5.5 million tonnes of primary aluminium but will produce less than one million tonnes at a handful of smelters.
Next on the chopping block could be Century's Mt. Holly, South Carolina, smelter. The company will close the plant by August 31 unless a new power deal is reached.