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Aluminum Premiums Outlook Update (December 2, 2019)

Executive Summary

USA

1. (From November 29). US MW premium gaps down to a twenty-one-month low; latest 2020 deals concluded with 2–3 cent/lb discounts under MW.

HARBOR's US MW P1020 Ingot Duty-Paid Supplier-Supplier Spot Transaction Premium gapped down today to a twenty-one-month low of 13.30–14.25 cent/lb from a previous range of 14.50–15.50 cent/lb. During the last weeks, Canadian primary producers with Section 232 exemptions (gives them a 9 cent/lb windfall to discount from) have sold at sharply lower premiums in an attempt to find a home for their growing long positions.

More details in full report.

EUROPE

2. (From November 29). European billet Q1 negotiations extending longer; Low end of Portugal spot premiums declines to $300 per mton.

“The longer you wait, the lower premium you can obtain” seems to be mantra that some European extruders are following, as we can confirm that various seem pushing to extend Q1 billet negotiations longer than usual, while pushing suppliers to offer them lower contractual premiums as time goes by (considering regional oversupply and aggressive supplier competition for market share). Even Tier 1 suppliers seem be facing further downside Q1 premium pressure, with the latest confirmed offers from some of them for Q1 being closer to $310 per mton in Southern Europe.

More details in full report.

LATIN AMERICA

3. (From November 25). Brazil domestic producers long and looking for exports amid depressed local market demand and a weak currency.

Brazilian P1020 producers seem to be increasingly looking for spot export opportunities, mostly through traders, to improve their cashflow position before the end of the year at a time when domestic spot demand remains practically dead and the Brazilian real depreciation against the US dollar is nearing historic lows. There is demand weakness in several aluminum intensive sectors, such as automotive production and B&C.

HARBOR's transactional spot P1020 ingot premium delivered duty-paid to Sao Paulo (for orders of at least 100 mton) stands at $190–$230 per mton, effectively its lowest average level since late 2016. Meanwhile, HARBOR's Transactional spot P1020 ingot premium CIF duty-unpaid Brazil (Santos) stands at $140–$150 per mton.

More details in full report.