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Aluminum Premiums Outlook Update (November 4, 2019)

Executive Summary


1. (From October 28). MW spot premium weakens further as backwardation and Section 232 exemptions continue to incentivize wide discounts.

HARBOR's US MW P1020 Ingot Duty-Paid Consumer-Supplier Spot Transaction Premium weakened farther to 16.05–16.20 cent/lb (which equates to discounts of 1.05–1.20 cent/lb below current journalistic MW premium references), from the previous range of 16.10–16.33 cent/lb. Meanwhile, HARBOR's US MW P1020 Ingot Duty-Paid Supplier- Supplier Spot Transaction Premium weakened to 15.50–16.30 cent/lb (implying discounts of 0.95–1.75 cent/lb below current journalistic MW premium references), from a previous range of 17.40–17.53 cent/lb.

More details in full report.

2. (From October 29). HARBOR Announces Publication of the World’s FIRST US MW P1020 GREEN ALUMINUM SPOT PREMIUM.

In response to the rapid rise of sustainability awareness and given requests from some of our clients, HARBOR announces today the launch of the world's first green aluminum premium, the US MW P1020 Green Aluminum Spot Premium.

Standard Specification. Daily duty-paid premium paid over the London Metal Exchange cash price for spot physical 99.7% high-grade aluminum with 4.5 kg or less of CO2 emitted per kg of aluminum produced (Scope 1 and 2). Calculations of CO2 emissions according to WRI and/or IAI GHG Protocols. Product traceable to a single smelter, delivered at US consumer plant in the Midwest area, on transactions between consumers and suppliers for volumes of 100 mton or higher, arrival within 7-30 days, net-30-day credit terms and standard credit risk.

More details in full report.

3. (From October 31). US billet imports decline again in October; ongoing 2020 contract negotiations slowing down further.

US offshore billet imports declined for a third-straight month in October after weakening by more than 18% y/y to 60 kmton mainly due to smaller volumes from India, the Middle East, and South Korea. This is the first three-month import volume decline since early 2017, causing US offshore imports to drop 15% y/y so far in H2 2019 after jumping by 25% y/y in H1 2019. Ongoing import decline seems aligned with a regional extrusion demand decline worsening in the second half of the year, with various extruders in the US and Mexico reporting double-digit sales declines over the last few months.

More details in full report.


4. (From October 31). European regional billet oversupply lingers; Q1 2020 billet contracts for Tier 2 and 3 fall to as low as $290 per mton.

European Q1 2020 contractual negotiations are ongoing, with premium declines of $15–$30 per mton seen across the board. As of today, we see Q1 contractual billet premiums hovering around $290–$340 per mton in Italy, $305–$330 per mton in Spain, $300–$330 per mton in Poland, $315–$345 per mton in UK, $320–$355 per mton in Northern Europe and around $310–$340 per mton in Portugal.

More details in full report.