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Record-high global aluminium premiums will lead to shorter-term supply contracts with floating premiums when negotiations for 2013 delivery begin in earnest at Metal Bulletin's 27th International Aluminium conference in Moscow next week.
Metal Bulletin's duty-paid European ingot premium has risen to $265-285 per tonne from $140-175 at the beginning of the year, while the duty-unpaid figure has reached $195-220 per tonne from $95-120 in the same period.
But the aluminium price itself remains very low. Averaging just over $1,870 per tonne on the London Metal Exchange in the last month, it remains well below the marginal cost of production at about $2,200. Premiums are no longer being added to prices merely to cover delivery costs. They have now become a vital part of producers' revenues.
"It is no longer the LME setting the market price. Now you have to look at the premiums as well," a consumer source said.
For these reasons, the producers will be approaching contract talks seeking to maximise the benefit of high premiums, so as to protect revenues while prices are depressed.
"Premiums now account for more than 10% of total revenues for many companies, and that cannot...