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LME prices up, but behavior remains erratic; APEX Act adds more bipartisan cosponsors; Brazilian P1020 premiums fall

Executive Summary

1. LME prices close above the $1,850 per mton mark amid US economic data; short-term upside continues to appear limited.

LME 3M aluminum prices closed the session at $1,854 per mton, up 0.4% or $7 per mton from yesterday, after testing a new eight-week intraday high of $1,857 per mton bolstered by stronger-than-expected US manufacturing data (Philadelphia area). Nevertheless, prices ended the session with some downward momentum, last quoted around $1,848 per mton in after-hours, as oil prices dipped by another 3%. We continue to expect LME aluminum prices to behave somewhat erratically amid short-term technical selling pressure above $1,850 per mton

More details in full report.

2. US MW APEX ACT UPDATE. Bipartisan support for APEX Act continues to grow in the House of Representatives.

Two more bipartisan lawmakers in the House of Representatives joined this week as cosponsors of APEX Act, which aims to investigate and regulate the MW premium. Rep. Diana DeGette (D-CO) and Rep. Russ Fulcher (R-ID) signed as cosponsors of the bill this week, after five others did last week. The APEX Act (H.R. 1406 bill) now has the support of twenty-nine cosponsors, of which sixteen are Republicans and thirteen are Democrats.

More details in full report.

3. BRAZIL P1020 PREMIUM UPDATE. Brazilian P1020 premiums decline amid oversupply and weak domestic demand.

HARBOR’s transactional spot P1020 ingot premium delivered duty-paid to Sao Paulo (for orders of at least 100 mton) fell today to $220–$240 per mton from $220–$260 per mton with the latest confirmed transaction closed closer to the middle of our new range. Brazilian market spot demand remains subdued amid: a) an ongoing manufacturing activity stagnation; b) increasing unit availability due to the revamping of Albras’ P1020 production; and c) increasing availability of offshore P1020 imports.

More details in full report.

4. LME Cash–3M contango loosens but remains relatively unsupportive for financing of units.

The LME Cash–3M contango widened to $18.25 per mton from $17.50 per mton, mainly as the August–September contango widened to $7.50 from $6.00 per mton, while the September–October contango loosened to $3.50 from $3.00 per mton. The backwardation in the October–3M segment held without a change from yesterday at $1.00 per mton. We estimate that, at the current level, the Cash–3M contango continues to be 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 rise but remain just below key resistance threshold.

SHFE two-month aluminum prices closed the overnight session marginally down but bounced back in after-hours trading until nearing their key resistance threshold of 13,950 yuan per mton ($1,795 per mton, excluding VAT). Prices were supported by higher LME aluminum prices, US economic data, and volatile sentiment regarding US-China trade talks. Technical indicators for SHFE prices remain bearish.

More details in full report.