Aluminum Premiums Outlook Update (March 18, 2019)
Executive Summary
USA
1. (From March 15). US BILLET ALERT. Some extruders declaring minimum monthly volumes while stepping up spot purchases at lower premium levels.
Widening gap between US billet spot and 2019 annual contract premiums seems to have started to impact some contracted order volumes as HARBOR's intel indicates various US extruders are declaring at, or close to, minimum billet volumes per their 2019 contracts. Premium differences translate to estimated savings of at least 1.0-2.0 c/lb considering 2019 billet contracts were largely closed with an upcharge around 11.5-14.0 c/lb over MWDP and current US spot billet premiums stand already at 10.0- 13.0 cent/lb.
More details in full report.
2. (From March 11). The LME launched today new futures contracts for US MW duty- paid and European duty-unpaid premiums; LME MW curve opens in a steep backwardation.
Two new premium futures contracts went live today on the LME. The LME launched two new cash-settled premium futures contracts on Monday: a) US Midwest P1020 delivered duty-paid and, b) European P1020 Duty-Unpaid In-Warehouse premiums. Preliminary data indicates that LME MW duty-paid premium financials for August– November 2019 were transacted at an average premium of $17.43 cent/lb ($384.25 per mton), with a preliminary volume of 1,000 mton.
More details in full report.
EUROPE
3. (From March 15). EUROPE BILLET ALERT. Q2 contract negotiations have ended with most volume closed between $450-$520 per mton. Spot premiums continue to weaken.
European Q2 billet contract negotiations have ended with most volumes closing between $450-$520 per mton. Contract premiums were pressured down the most in last few weeks, pushing some Tier 1 suppliers to close quarterly contracts recently as low as $470 per mton, which in turn caused Tier 2 billet premiums to decline further with most recent confirmed contracts closed with premiums between $440-$450 per mton. In turn, Tier 3 suppliers were forced to push latest Q2 premiums to as low as $420-$430 per mton recently.
More details in full report.
ASIA
4. (From March 14). MJP spot premium increases to $94–$100 per mton and trades at the high end of equilibrium range.
HARBOR's MJP (Main Japanese Ports) CIF P1020 ingot spot transaction premium increased to a nine-month high of $94–$100 per mton from a previous $92–$94 per mton, as recently confirmed spot activity has taken place within the new range. Spot premiums in Asia continue to be supported by less tight LME contangos during the past few weeks.
More details in full report.