U.S. Aluminum Imports Surge in March Lured by High Physical Prices

U.S. aluminum imports jumped in March with inflows from Russia climbing to the highest in over two years, U.S. data showed on Thursday, as an unprecedented gain in physical prices at the start of the year attracted material from Russia.

Some 264,100 tonnes of aluminum landed in the United States, a net importer of the metal, in March, the highest since August last year, up 11 percent from February and 14 percent higher than a year earlier.

The data is the strongest sign yet that merchants diverted metal to the region, lured by the sudden surge in premiums in January as banks, traders and consumers were caught short of metal and had to scramble for supplies. 

Premiums are paid on top of the benchmark London Metal Exchange price for physical delivery. Due to shipping times, the March data was the first to show a significant inflow.

"The jump in the premium is probably what drove imports in the first quarter. Most logically, it would have arrived in Baltimore so they (merchants) can sell it if needed," said a U.S. trader.

Inflows from Russia, the home of UC Rusal, the world's No. 1 producer, were particularly dramatic, partially reversing a years-long decline.

Over 44,000 tonnes arrived in the month, more than double March 2013 levels and up 52 percent from February. The total exceeded long-term monthly averages and was almost three times the monthly average of 16,000 tonnes last year, according to Reuters calculations.

Canada accounted for the biggest portion of the total as has been the case for years.

In the first two weeks of the year, the Midwest premium almost doubled to record highs near 20.5 cents per lb and are still close to those levels three months later.

The data will fuel the debate over the availability of metal even as the global market faces a 5-million-tonne surplus and as the LME struggles to solve a years-long crisis over its storage policy, which end users say have led to inflated physical prices and distorted supplies. 

It is not clear if the strong shipments continued in April - some traders say the subsequent surge in premiums in Europe and Asia closed the arbitrage, potentially limiting the amount of metal headed to the United States.

Even so, consumers, merchants and banks have continued to draw on domestic supplies. Stocks in London Metal Exchange warehouses in the U.S. have slumped to 1.7 million tonnes, their lowest since June last year and down from 1.9 million in mid-January.

Traders say a portion of that may also have headed into storage outside of the exchange, rather than to end users, as part of financing deals that increase the perception of lower supplies.