Winter Park, Florida 20/09/2016 - CME Group's aluminium MW US Transaction Premium (AUP) contract moved back above 6 cents per pound amid an uptick in third-quarter demand and a more favourable inventory financing environment.
The September AUP contract yesterday settled at 6.152 cents per pound, up 2.65 percent week-on-week. Last Tuesday, the contract fell to an all-time low of 5.993 cents.
Further along the curve, October and November both settled at 6.5 cents, up 3.2 percent, and December was unchanged at 6.75 cents. The entire calendar year for 2017 closed at 7.4 cents, up five percent week-on-week.
FastMarkets' US Midwest spot premium last week fell to a seven-year low of 5.25-5.9 cents per pound but market participant said that business has picked up and some deals are now being completed above 6 cents.
On the demand side, after a particularly weak June and July, activity showed some improvement in August. The Aluminum Association's Index of Net New Orders of aluminium mill products for August increased ten percent over the previous month, which is a solid recovery from July when orders decreased 9.9 percent.
Meanwhile, aluminium sheet and plate net shipments by US and Canadian producers totalled 345,000 tonnes during August 2016, a rise of 5.3 percent year-on-year and 11.5 percent month-on-month, according to the Aluminum Association.
Physical premiums have also been boosted by improved contangos on the London Metal Exchange. The benchmark cash-threes spread is now at $13.25 per tonne while the Dec16-Dec17 spread is at $47.15. The contangos are now wide enough to support inventory financing so the pressure on banks and other metal holders to liquidate stocks has eased.
(Editing by Mark Shaw)