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Demand for metal spikes in Asian LME warehouses; Technical buying emerges around $1,800 per mton support zone


Executive Summary

1. LME INVENTORY ALERT LME canceled warrants spike to a ten-month high amid supportive contango, premiums outlook and financing context.

Orders to remove aluminum units from LME warehouses spiked today by 119,675 mton to a ten-month high of 610,750 mton. All of the increase took place across Asia as canceled warrants increased by 108,325 mton in Malaysia, 6,750 mton in South Korea, and 4,600 mton in Singapore. The current environment of wide contango is supportive for outflows from LME inventories, as the current nearby and long-term contango yields are enough for most players to at least cover the cost of carrying units (storage, financing, and insurance costs), while spot premiums in Asia and Europe (MJP and Rotterdam) seem to have bottomed out.

More details in full report.

2. LME prices up and above $1,800 per mton as rally pauses; price technicals and demand sentiment still consistent with short-term upward trend.

LME 3M aluminum prices closed the session at $1,803.50 per mton, up 0.2% or $3 per mton. Prices tested an intraday peak of $1,817 per mton but reversed most gains late in the session as the US dollar strengthened to a new two-week high and oil prices reached a nearly one-month low. Moreover, demand sentiment was supported by a spike in LME aluminum canceled warrants, a de-escalation of geopolitical tensions, and a confirmation that Chinese and US officials will meet next week in Washington for the Phase One trade deal’s imminent signing.

More details in full report.

3. LME Cash–3M contango narrows amid fresh cancelations but remains premium- supportive.

The Cash–3M contango narrowed today to a one-week low of $28.50 per mton from Wednesday’s $31.75 per mton as conditions tightened through March: the Cash–January contango narrowed to $1.00 from $2.75 per mton, the January–February contango tightened to $12.50 from $13.75 per mton, and the February–March contango narrowed to $10.00 from $10.75 per mton. As we have previously mentioned, massive inflows into the LME warehousing system in Q4 2019 are still expected to support nearby contangos, despite today’s spike in canceled warrants.

More details in full report.

4. US AND MEXICO SECONDARY MARKET ALERT. Audubon to build a secondary aluminum plant in Texas.

HARBOR has learned that the Kentucky-based secondary aluminum alloy ingot producer Audubon will start soon the construction of a new facility in Corsicana, Texas. Local media reports indicate the plant will have an investment of $50 million, will create 100 jobs, and will be operational in early 2021. Audubon is already one of the largest secondary aluminum alloy ingot producers in the continent, has been in the market for more than 20 years and has been in the Mexican market for the last 12 years.

More details in full report.

5. HARBOR’s Implicit Green Aluminum Upcharge assessed today at zero.

Standard Specification: daily duty-paid premium paid over the LME cash price for spot physical 99.7% high-grade aluminum with 4.5 kg or less of CO2 emitted per kilogram of aluminum produced, according to Level 1 disclosure per IAI’s “Aluminium Carbon Footprint Technical Support Document—v1-final—15th Feb 2018.” Level 1 only includes smelter emissions scope 1 and 2 (including anode production and casting operations) and does not include alumina refining and bauxite mining emissions scope 1 and 2.

More details in full report.

6. China’s aluminum prices testing three-month highs again.

SHFE front-month aluminum prices closed the overnight session up 0.4% at 14,405 yuan per mton ($1,839 per mton, excluding VAT) and extended gains in after-hours to test a new three-month high just above 14,500 yuan per mton ($1,850 per mton, excluding VAT). Prices found support from: a) optimism regarding the US-China Phase One agreement (to be signed next week), b) China’s yuan strengthening to a five-month high against the US dollar, and c) reports of easing domestic primary aluminum inventory buildups.

More details in full report.