Aluminum Premiums Outlook Update (May 28, 2019)
Executive Summary
USA
1. (From March 21). US MW P1020 ALERT. MW duty-paid premium firms up to 16.80- 17.78 cent/lb amid wider LME spreads; trader seen building up sizeable amounts of Canadian metal units on bets Canada will agree to a Section 232 Tariff exemption in exchange for a hard quota.
HARBOR's US MW P1020 Ingot Duty-Paid Consumer-Supplier Spot Transaction Premium strengthened today to 16.80-17.78 cent/lb (which equates to MW journalistic references minus 2.45 to minus 1.47 cent/lb), up from a previous 16.35-16.80 cent/lb. MW duty-paid premiums firm up today as a lagged response to an LME price rally that took place earlier in the week (impact duty component of the MW premium) and wider LME spreads.
More details in full report.
2. (From March 20). CME MW duty-paid financials for April–May at a three-week high; LME MW financials waiting to gain traction.
Preliminary data indicates that CME MW duty-paid premium financials for April–May 2019 were transacted today at a three-week high average premium of 18.98 cent/lb, increasing 0.68 cent/lb from a week ago with a preliminary volume equivalent to 12,175 mton (the largest in two months). Moreover, preliminary data indicates that CME MW duty-paid premium financials for H2 2019 were transacted today at an average premium of 17.40 cent/lb, up 0.07 cent/lb from a week ago with a preliminary volume equivalent to 1,700 mton.
More details in full report.
EUROPE
3. (From March 21). European P1020 premiums tick up, continue to trade within their long-term equilibrium levels.
HARBOR's European in-warehouse Rotterdam P1020 ingot duty-paid spot transaction premium slightly increased on the high end to $130–$143 per mton from a previous $130–$140 per mton. Moreover, HARBOR's European in-warehouse Rotterdam P1020 ingot duty-unpaid spot transaction premium also ticked up today on the high end to a four-month high of $70–$85 per mton from a previous range of $70–$80 per mton. Rotterdam premiums have continued to hover within their long-term equilibrium ranges as support provided by wide contangos has been building up for the past two months. The Cash–3M contango averaged $25 per mton during February and $24 per mton so far in March—levels that result good enough for a number of players to profitably finance short-term cash-and-carry positions.
More details in full report.
4. (From March 21). Spain's only smelter that produces primary aluminum billet at risk; European spot premiums fall further while Q3 premiums seen below Q2
San Ciprian at risk as measures to lower its energy cost appear insufficient according to Alcoa. This after the company reviewed the latest draft measures announced by the Spanish government that aim to lower uncompetitive electricity costs. Likewise, Spanish labor unions seem to agree that the draft measures presented seem insufficient and that it also discourages potential buyers of Aviles and la Coruna. The potential closure of San Ciprian would reduce European primary billet supply by 80 kmton, which equates to about 4% of Western Europe's billet production.
More details in full report.