LME prices up but continue to lack conviction; Billet production disruption in Bosnia seems highly likely
Executive Summary
1. LME prices rise marginally, but gains still capped just above $1,800 per mton.
LME 3M aluminum prices closed the session up 0.3% or $6 per mton at $1,809 per mton. Prices faced technical selling at an intraday peak of $1,810 per mton but were supported by firmer oil prices (which neared a one-week high as Western tensions with Iran continue to build up). The upside for aluminum prices remained capped by a stronger US dollar, which held near a two-week high amid diminished confidence on the Fed cutting interest rates aggressively later this year. Prices continue to trade within a predominant range of $1,750–$1,800 per mton.
More details in full report.
2. BOSNIA ALUMINUM UPDATE. Aluminij primary aluminum smelter could be fully halted as soon as Wednesday.
According to media reports, the Aluminij Mostar smelter in Bosnia would face a full production shutdown on Wednesday, July 10, as its power supply could be fully halted the night before. The smelter has managed to obtain electricity in the past few days due to short-term financing measures, while management seeks a strategic partner to avoid bankruptcy. However, reports indicated today that negotiations with one of the prospective investors broke down, and Aluminij would not have enough resources to secure electricity beyond the aforementioned date. Around 75 kmtpy primary aluminum production could be impacted (mainly billet).
More details in full report.
3. MW Duty-Unpaid P1020 premium unchanged at 8.92–9.49 cent/lb.
HARBOR’s MW Duty-Unpaid Premium (MWP DUP) was assessed today at a two-month high of 8.92–9.49 cent/lb, unchanged from Friday amid a steady financial cost of metal in transit.
More details in full report.
4. LME Cash–3M contango at its narrowest level in two months; concentrated holdings of LME live warrants persist.
The LME Cash–3M contango settled unchanged from Friday at a two-month low of $19.00 per mton. Today’s narrowing in the Cash–August contango to $10.75 from Friday’s $11.50 per mton was offset by the August–3M contango widening by the same magnitude to $8.25 from $7.50 per mton. At the current levels, we estimate that the Cash–3M contango remains unsupportive of cash-and-carry deals for most players (bearish for spot premiums as the financing of metal becomes uneconomic).
More details in full report.
5. China’s aluminum prices resume losses as technical downward trend remains in place.
SHFE two-month aluminum prices closed the overnight session down 0.3% at 13,770 yuan per mton ($1,771 per mton, excluding VAT). Prices tested an intraday low of 13,735 yuan per mton ($1,766 per mton, excluding VAT) amid a selloff across Asian equity markets (the Shanghai composite index dropped 2.6%). Nonetheless, prices regained some ground during the second half of the session amid expectations of an improvement in upcoming economic indicators (auto sales and credit growth). SHFE prices remain in a short-term technical downward trend targeting 13,500 yuan per mton ($1,740 per mton, excluding VAT).
More details in full report.