New logistics problems, Physical aluminum premiums continue to rise

China on Wednesday closed a container terminal at the port of Ningbo-Zhoushan until further notice after a worker there tested positive for the coronavirus. The port is considered the third busiest container handling hub in the world. This has brought back memories of the Yantian port closure at the end of May, which lasted about a month and had a massive impact on global shipping. This is because in the wake of the closure, there were long traffic jams outside many ports and freight rates continued to rise. The index for 40-foot containers calculated by maritime research and consulting firm Drewry, which covers eight shipping routes, is currently at a record high of over $9,400 per container. Freight costs have more than doubled since the beginning of the year, and have even increased almost fivefold in the last twelve months.

The disruption to shipping has contributed greatly to the shortage of raw materials in many regions/countries and the rise in commodity prices. Container shortages are part of the reason why physical aluminum premiums continue to rise. Futures contracts of premiums traded on the Comex are trading at an all-time high of around USD 760 per ton for the USA, while those for Europe are at a near record high of USD 360 per ton. In addition to the truck and container shortages, the strike-related production cutbacks at a major aluminum smelter in Canada are having an impact in the USA. In addition, the USA still has tariffs on aluminum imports from various countries. However, the USA covers around 90% of its aluminum requirements with imports. Premiums in Europe have to be increased to prevent too much material being diverted to the USA. In Europe, the export tax introduced in Russia on August 1 is probably also playing a role.

Source: Commerzbank Research, Photo: Fotolia