NEW YORK -- Zinc die-cast alloy premiums in the Midwest are holding up despite weakening demand as many consumers begin summer shutdowns heading into the July 4 holiday weekend.

Alloy producers said that high trucking rates and the lack of low-priced special high-grade (SHG) zinc on their books were helping to keep premiums firm despite the anticipated slow spell. Producers said they expected this quiet period to last for around two weeks.

"It's steady as she goes. We've seen a slight increase in business (lately), but this is a slow time of year with vacations and maintenance shutdowns," one Midwest alloy producer said.

Market participants said that while SHG zinc prices were no longer on a tear, as they were a few months ago, zinc producers remained tight and most alloy producers no longer had any cheaper inventory left on their books.

"Alloy premiums are still strong because alloyers are running out of cheap SHG on their owns books," a second alloy producer said. "They have it, but they paid higher premiums for it" and therefore would try to pass on that cost.

Another major factor supporting prices are freight costs, which one alloyer described as "out of control." Rates for trucks headed from the Midwest to the East Coast were particularly high, sources said.

"Drivers don't want to make that trip because they can't get a load for a return journey," said a Midwest alloy producer who ships to the East Coast. The producer said rates were now some 35 percent higher than what he traditionally paid.

"They also add on the fuel surcharge, but when you look at diesel prices they haven't really gone up that much. It doesn't compute," he said, adding that trucking routes going north and south were a little easier in terms of freight costs.

No. 3 and No. 7 alloys currently are trading with premiums of around 12 cents a pound over the London Metal Exchange zinc price. No. 5 alloy is at 13 cents and No. 2 at 14 to 15 cents. Foundry alloys also are unchanged despite the increased price of aluminum, a major component for some of these alloys.

"We haven't been able to pass the aluminum cost on yet," an alloyer said.