The Davis Index P1020 premium inched up by 0.2¢/lb to 28.2¢/lb above the LME Aluminium cash settlement on Monday following sluggish trading and high LME Aluminium contract prices.
Trading in the P1020 market has been subdued since the high-grade LME contract is now above $2,500/mt, only about $50/mt off this year’s peak. The premium continues to move up, but rather slowly due to weak demand from the automotive sector following the semiconductor chip shortage. Still, traders are looking at a 30¢/lb Midwest premium this summer.
Premiums have also risen over the past few months on muted imports of primary aluminum due to the Section 232 tariffs. Many industry associations are raising their voice against these tariffs, which are currently set at 10pc and urging the Biden administration to overturn or reduce them. If this comes to pass, much more imported aluminum will flow into LME warehouses across the US, restoring supply and prior levels for this premium.
The billet market is also muted with the Davis Index 6063 billet premium unchanged at 25¢/lb above P1020 since the past two months due to a lack of spot trading amid a dearth of material in the domestic market. Buyers continue to put downward pressure, aiming for 20-22¢/lb but if any trades are made, they are at a much higher premium.
The official LME Aluminium cash contract closed Monday at $2,504/mt, up by $86.5/mt from Jun 7.