The Midwest aluminum premium has risen as fears about costs set in after Alcoa’s announcement that it is shuttering much of its North American smelting capacity. Despite cuts in China, zinc is still massively oversupplied.

Midwest Premium Rises on Alcoa Shutdowns Announcement

The US Midwest aluminum premium has risen to its highest level in six months, traders told Reuters on Tuesday, but the current forward curve and Alcoa‘s plans to save a US smelter from curtailment were seen pressuring prices in the near-term.

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The premium, paid on top of London Metal Exchange (LME) futures prices for physical delivery in the US, has risen to around 8.75 cents a lb., the traders said, citing the continued impact of Alcoa’s plans to shutter the bulk of its US smelting capacity, announced Nov. 2.

Chinese Cuts Fail to Balance Zinc Market

Output cuts announced by Chinese zinc smelters last week will do little to tighten next year’s global supply-demand balance in refined metal because already-known mining cutbacks would have forced smelters to reduce production anyway, Reuters reported.

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On top of that, hard-hit prices will fail to get much of a lasting boost in coming months due to a glut of world inventories, although there may be spikes of short-covering, analysts and investors said.