LME prices close again above $1,770 per mton; Risks of billet production disruption in Bosnia; MW duty-paid premium falls to a fifteen-month low
Executive Summary
1. LME prices continue to experience a short-term pause, holding within the $1,770– $1,800 per mton range.
LME 3M aluminum prices closed the session up 0.7% or $12 per mton at a one-week high of $1,790 per mton. Early in the session, prices tested intraday levels as low as $1,768 per mton due to downbeat Chinese auto sales data, but regained ground for the remainder of the session until hitting an intraday peak of $1,792 per mton. While aluminum outperformed the base metals complex, gains remained somewhat limited by underlying trade-related concerns and falling oil prices. Key technical support at $1,770 per mton holds, but a medium-term bearish formation remains.
More details in full report.
2. PRODUCTION ALERT. Bosnia’s Aluminij Mostar smelter at risk of experiencing a power outage at the end of this week.
According to circulating reports, the Aluminij Mostar smelter in Bosnia could face a production disruption at the end of the week since its power supplier plans to stop delivering electricity to the smelter as of June 16. As a result, management is reportedly seeking a new power supplier to avoid production losses. Around 75 kmtpy primary aluminum production could be impacted (mainly billet). Stronger support from Bosnia’s government would be required to prevent production losses.
More details in full report.
3. US MW P1020 ALERT. High end of the MW premium range plummets amid decline in LME prices, oversupply of scrap and primary aluminum units, declining freight rates, end- of-quarter destocking, among other factors.
HARBOR's US MW P1020 Ingot Duty-Paid Consumer-Supplier Spot Transaction Premium declined today to a fifteen-month low of 16.00–16.30 cent/lb, from the previous wide range of 16.21-17.60 cent/lb. MW duty-paid spot premiums continue to receive downward pressure from: a) lower LME prices, b) Australia and Canada's exemption from Section 232 Tariffs, c) weakness in national freight rates, d) end-of-quarter destocking, and d) a growing oversupply of scrap and P1020 units that has turned producers, traders, and even consumers into sellers.
More details in full report.
4. LME Cash–3M contango widens again above $30 per mton as June–July contango loosens further.
The LME Cash–3M contango widened to $30.50 per mton from yesterday’s $29.75 per mton as a result of a widening June–August segment: the June–July contango loosened to a new five-month peak of $11.00 per mton from $10.75 per mton yesterday, and the July–August contango widened to $9.50 from $9.00 per mton. As a result, we estimate that the Cash–3M contango continues to be supportive for spot premiums, as it is wide enough for most players to profitably finance short-term cash-and-carry deals. Concentrated June short positions (due next week) and a narrow availability of warrant holdings could create some nearby tightness into next week.
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5. China’s aluminum prices struggle to regain ground but hold just above key threshold.
SHFE two-month aluminum prices closed the overnight session practically unchanged at 14,015 yuan per mton ($1,793 per mton, excluding VAT). In intraday terms, prices tested again their 200-day moving average, reaching levels as low as 13,955 yuan per mton ($1,785 per mton, excluding VAT) amid domestic demand growth concerns and trade uncertainty; however, prices rebounded later in the session on technical buying triggered after testing the aforementioned support threshold. SHFE aluminum prices continue to hold just above key technical support threshold—their 200-day moving average, which stands around 13,975 yuan per mton ($1,785 per mton, excluding VAT).
More details in full report.
6. MW Duty-Unpaid P1020 premium slightly down to 8.52–9.07 cent/lb.
HARBOR’s MW Duty-Unpaid Premium (MWP DUP) was assessed today at 8.52–9.07 cent/lb, falling marginally from yesterday’s 8.53–9.09 cent/lb amid today’s slight widening in nearby contangos reducing the financial cost of metal in transit.
More details in full report.