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LME price short-term technicals deteriorate; ALUBAR reaches conditional purchase of Reybec rod mill

Executive Summary

1. Bearish short-term technical signal triggered today; tomorrow’s monthly close and Fed’s interest rate outlook highly relevant for price direction.

LME 3M aluminum prices closed the session down 0.4% or $8 per mton at $1,803 per mton. Prices closed near an intraday low of $1,802 per mton after declining during the second half of the session as: a) the US dollar tested a new two-month high, and b) comments from President Trump indicated that the US remains far from closing a trade deal with China. One of our short-term technical indicators turned bearish today, triggering a sell signal for the first time since April. The last time this signal was triggered, prices fell by nearly 6% over the following four-week period.

More details in full report.

2. LME Cash–3M contango widens above $25 per mton (supportive again for spot premiums).

The Cash–3M contango widened to $25.50 per mton from yesterday’s one-week low of $24.00 per mton; the August–October contango regained some steepness after August– September eased to $7.50 from $6.75 per mton and September–October widened to $6.00 from $5.50 per mton. As a result, we estimate that the Cash–3M contango is again supportive for spot premiums around the world; it is wide enough for most players to profitably finance short-term cash-and-carry deals.

More details in full report.

3. HARBOR FIRST ALERT! ALUBAR reaches conditional agreement to purchase Becancour (Reybec) rod mill; seems pending on a revised labor union agreement.

HARBOR is hearing in the market that ALUBAR Group, the largest Latin American aluminum electrical cable manufacturer has just agreed to a conditional purchase of the Becancour (Reybec) rod mill, pending a labor union agreement revision. The Becancour rod mill, idled since February 2019 due to Sural's bankruptcy, has an annual capacity of 90k mtpy, ALUBAR's purchase of this asset effectively makes them a major North American wire rod producer.

More details in full report.

4. EUROPEAN SCRAP ALERT. Twitch and extrusion scrap flowing from North America to South Europe.

Our intel from the ground indicates that some South European consumers (especially in Italy) are buying twitch units in the US at prices around 47 cent/lb (picked up US ports). These prices are not necessarily cheaper than those in Europe, but Spanish and Italian consumers are partly hedging their bets in terms of volumes and prices against September's uncertainty (after the extended August holiday in Europe). Moreover, some European suppliers are still sending twitch and Zorba units to China, although it is not clear at this point if the material will be rejected or not.

More details in full report.

5. China’s aluminum prices keep facing selling pressure at key technical resistance level.

SHFE two-month aluminum prices closed the overnight session up 0.3% at 13,910 yuan per mton ($1,788 per mton, excluding VAT) but lacked enough strength to sustain intraday gains just above the key 200-day moving average, which stands at 13,945 yuan per mton ($1,793 per mton, excluding VAT). Concerns about domestic demand remained in place amid expectations for domestic manufacturing activity to remain in contraction territory this month (official PMI data is due tonight).

More details in full report.