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European Aluminum Premiums Advance to Decade-High on Financing
May 18,2010 09:16CST
industry news

LONDON, May 18 -- European premiums paid for aluminum jumped to the highest in at least a decade because of a scarcity of available metal, CRU Group said.

The fee, added to the price of metal for immediate delivery on the London Metal Exchange, increased to $105 a metric ton last week for deliveries to Rotterdam warehouses, Marco Georgiou, an analyst at the research group, said May 14. Rotterdam is Europe's largest port.

Aluminum stockpiles in warehouses monitored by the LME have expanded sevenfold since the end of 2005 as supply outpaced demand. As much as 80 percent of those inventories are tied to financing agreements, limiting available supplies, Deutsche Bank AG estimated May 13.

"The spot market is quite tight at the moment," London- based Georgiou said. "A lot of the stocks are still held in warehousing deals and not available to the market."

The premium for duty-unpaid metal, which covers storage and costs such as insurance, was $95 in April and $75 in March, Georgiou said. The premium for duty-paid metal, which includes European import taxes, rose to $175 a ton from $160 in April.

Stockpiles dropped 3 percent from a record 4.64 million tons in January. A single party held 30 percent to 39 percent of them, according to bourse data from May 12. Aluminum production will outpace demand by 896,000 tons this year, down from 1.13 million tons last year, Barclays Capital estimates.

In the U.S. Midwest, the premium has risen to 6.5 cents a pound, the highest since 2005, from 5.75 cents in January, Georgiou said.

Premiums should ease in the third quarter as more supply from the Middle East and India reaches markets in Europe and the U.S., Georgiou said.

Aluminum for three-month delivery on the LME fell 3.4 percent to $2,030 a ton in London by 8:27 a.m. Prices are down 9.1 percent this year, after a 45 percent jump last year.


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