U.S. aluminum premiums rise as Alcoa cutbacks signal turnaround
By Luc Cohen
NEW YORK Nov 3 (Reuters) - U.S. aluminum premiums have jumped to their highest in three months after Alcoa announced plans to idle the bulk of its U.S. smelting capacity, stirring speculation among traders that the market may have turned a corner.
Spot CME Midwest premiums rose to 8 cents per lb on Monday for the biggest one-day jump in months as traders scrambled to secure metal in anticipation of lower domestic output even as global inventories are plentiful. Worries about waning demand from China, the world's top producer, also linger.
Premiums were firm around 7.9 cents on Tuesday.
On Monday, one of the world's leading aluminum producers announced it would curtail production at three of its four U.S. smelters, slashing annual capacity by 500,000 tonnes.
The rise in surcharges, paid on top of the benchmark London Metal Exchange price, will offer some comfort to traders and producers hit by the unprecedented plunge in premiums earlier in the year as rising Chinese exports and the release of aluminum from financing deals in warehouses flooded the market.
But it is far cry from the 24 cents seen in January, and LME prices remain close to or below breakeven for most producers.
Still, combined with planned cuts by Century Aluminum , the curtailments will remove more than 900,000 tonnes of capacity from the market.
That is a whopping 20 percent of U.S. consumption that will need to be replaced by imported metal in the future, increasing shipping costs and boosting premiums. Continued...