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Technical price target of $1,680-$1,550 per mton still in place; Brazil's P1020 premiums fall to multi-year lows

Executive Summary

1. LME prices fall as short covering loses momentum; Technical price target of $1,680- $1,550 per mton still in place.

Prices closed lower for the first time in five sessions, down 0.4% or $7.50 per mton at $1,744 per mton. LME 3M aluminum prices continued to find resistance (as anticipated) at the $1,745–$1,770 per mton zone. Today, prices were unable to trade higher than $1,749 per mton, underperforming gains across the commodity complex amid US-China trade optimism, while testing levels as low as $1,734.50 per mton pressured down by reports about alumina spot prices declining to a new two-year low. Technically, LME aluminum prices are still targeting $1,680 per mton.

More details in full report.

2. BRAZIL P1020 ALERT. Brazil’s delivered duty-paid premiums decline to multi-year lows as domestic demand remains subdued while suppliers sell below $200 per mton.

HARBOR’s transactional spot P1020 ingot premium delivered duty-paid to Sao Paulo (for orders of at least 100 mton) fell today to $190-$230 per mton from $220-$240 per mton, amid a practically dead domestic spot demand environment which has essentially forced suppliers to lower delivered duty-paid premiums below $200 per mton in an effort to allocate units while luring consumers that would otherwise stay on the side considering low domestic capacity utilization levels in both the B&C and automotive markets.

More details in full report.

3. LME Cash–3M spread tightness persists (bearish for spot premiums).

The LME Cash–3M contango closed today at $8.00 per mton from yesterday’s $7.75 per mton. The Cash–November contango widened to $14.50 from yesterday’s $13.50 per mton, while the November–December contango narrowed to $2.75 from $3.50 per mton, and the December–3M backwardation held without a change at $9.25 per mton. At today’s level, the Cash–3M contango is not supportive of cash-and-carry deals as the financing of metal becomes uneconomic (bearish for spot premiums).

More details in full report.

4. MW Duty-Unpaid P1020 premium marginally down to 9.25–10.02 cent/lb.

HARBOR’s MW Duty-Unpaid Premium (MWP DUP) was assessed today at 9.25–10.02 cent/lb, marginally down from yesterday’s 9.26–10.03 cent/lb amid today’s slight widening in nearby LME contangos, which reduces the financial cost of metal in transit.

More details in full report.

5. China’s aluminum prices hardly changed amid trade-related uncertainty.

SHFE two-month aluminum prices closed the overnight session marginally down at 13,970 yuan per mton ($1,733 per mton, excluding VAT SHFE) and extended losses in after-hours trading until reaching 13,920 yuan per mton ($1,727 per mton, excluding VAT SHFE). Prices held within a narrow range amid technical resistance at the 200-day exponential moving average and volatile sentiment around trade talks being held in Washington later this week. SHFE aluminum prices trade inside the technical support zone of 13,850– 14,000 yuan per mton ($1,715–$1,735 per mton, excluding VAT).

More details in full report.