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European aluminum duty-unpaid premiums under pressure

By Greg Smart in London

March 1, 2013 - The European physical aluminum market has seen little business concluded over the past week despite prices falling on the London Metal Exchange and duty-unpaid premiums coming under pressure.

The Platts premium assessments for duty-unpaid aluminum have all fallen the week ended March 1. The premium assessment for duty-unpaid Good Western came down on March 1 to $210-220/mt, plus LME cash, in-warehouse Rotterdam, having fallen February 25 to $215-225/mt from $220-230/mt the previous week.

The premium for A7E came down on March 1 to $210-220/mt plus LME cash, in-warehouse Rotterdam from $210-225/mt on February 28, having also come down on February 25 to $215-225/mt from $220-230/mt the previous week.

The premium assessment for A7E FOB St Petersburg came down to $200-210/mt plus LME cash from $205-215 the week ended February 22.

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"I have a few inquiries, but customers are holding back until the last minute to book material," one European trader said.

The trader said there were likely to be more inquiries over the next couple of weeks as the second quarter approaches and customers look to book material for delivery over that period.

However, at the moment most customers were sitting back in anticipation of lower LME aluminum prices, the trader said.

A second trader said that he also believed the market was under pressure. "The numbers are coming off slightly and premiums are likely to fall as the June/July backwardation approaches," he said.

The trader said that premiums were in a range of $290-300/mt plus LME cash on a duty-paid basis, but that duty-unpaid premiums were being concluded at $220/mt and under, plus LME cash.

A consumer said the market was still relatively quiet but added that duty-unpaid premiums were weaker. He said he had been able to book some off-grade Russian material at $205/mt plus LME cash on a duty-unpaid basis.

"I have booked 200 mt of duty-unpaid at $205/mt and there is more off-grade material available," the consumer said.

A second consumer said that he was looking to conclude a nine-month contract for 5,000 mt to be delivered from the start of the second quarter until the end of the year.

"Premium offers are in a wide range, but I haven't started to negotiate yet. I have an offer at $220/mt that I think I will be able to conclude nearer $215/mt," he said.

The second consumer said there was nervousness in the market over the approaching backwardation and that people were looking to get rid of units as a result. "My feeling is that the market is coming under pressure," he said.

A producer said the market was "dead at the moment," but that there were definitely signs of weakening duty-unpaid premiums.

"I think we are now in a range of $210-220/mt and people know there is room for negotiation," he said. The producer said that it was not just the emerging backwardation that was putting pressure on duty-unpaid premiums.

"From the macro-economic view, things are bearish. The eurozone crisis is still going on and I don't think the worst is over. The market just seems to be drifting sideways and range trading. When prices fall, purchasing managers wait in expectation of an avalanche," he said.

The Platts premium assessment for duty-paid Good Western was unchanged at $290-300/mt in the week ended February 22, in-warehouse Rotterdam plus LME cash.

Next article: Aluminum premiums steady on tight supply, wide contangos

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