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LME prices come back from below $1,770 per mton (jury still out); Chinese aluminum export boom continues

Executive Summary

1. Prices climb back above key $1,770 per mton threshold, breakout confirmation still pending.

LME 3M aluminum prices closed the session at $1,775 per mton, up 0.6% or $11 per mton from yesterday. In the first half of the session, prices fell to a new 29-month intraday low of $1,751.75 per mton pressured down by stronger than expected semis exports from China. However, aluminum bounced back during the second half of the session bolstered by: a) resilient technical buying around $1,765 per mton, and b) higher prices across the base metals complex amid relief from the fact that the US and Mexico averted the imposition of new tariffs. LME aluminum prices remain in a medium-term bearish trend but $1,770 per mton holds as a key support threshold.

More details in full report.

2. CHINESE ALUMINUM EXPORTS UPDATE. Chinese aluminum exports boomed in May despite a narrower arbitrage window.

In May, China’s exports of aluminum semis and unwrought products increased by 11.7% y/y, accelerating marginally from April’s pace of 10.7% y/y, to a monthly volume of 536 kmton. Exports of semi-fabricated aluminum products (sheet/plate, foil, extrusions, and cable/wire) typically represent about 90% of this volume. Exports have been consistently expanding at double-digit annual rates over the last year (since June 2018), averaging growth of 21.2% y/y and an annualized volume of 6.1 million mton. However, annual growth rates have moderated amid a narrower export arbitrage window.

More details in full report.

3. China’s aluminum prices fall toward two-month lows, testing a key support threshold.

SHFE two-month aluminum prices closed overnight at 13,955 yuan per mton ($1,782 per mton, excluding VAT), settling at the lowest level since mid-April and falling 0.4% from last Thursday amid rising demand growth concerns and downbeat May imports data from China. Nonetheless, prices managed to rebound in after-hours trading to levels just above 14,000 yuan per mton ($1,787 per mton, excluding VAT) after facing some technical support around their 200-day moving average. SHFE aluminum prices are now testing technical support around the 200-day moving average threshold, which stands around 13,975 yuan per mton ($1,785 per mton, excluding VAT).

More details in full report.

4. LME Cash–3M contango remains relatively wide amid loose spreads ahead of August (supportive for spot premiums).

The LME Cash–3M contango narrowed to $30.25 per mton from Friday’s two-week high of $31.25 per mton, as nearby contangos narrowed through August: the Cash–June contango to $4.25 from $4.75 per mton, the June–July contango to $10.50 from $10.75 per mton, and the July–August contango to $9.00 from $10.00 per mton. As a result, we estimate that the Cash–3M contango is currently supportive of spot premiums, as it is wide enough for most players to profitably finance short-term cash-and-carry deals.

More details in full report.

5. MW Duty-Unpaid P1020 premium increases to 8.52–9.07 cent/lb.

HARBOR’s MW Duty-Unpaid Premium (MWP DUP) was assessed today at 8.52–9.07 cent/lb, increasing from Friday’s 8.49–9.04 cent/lb amid today’s tightening nearby contangos increasing the financial cost of metal in transit.

More details in full report.