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Demand momentum pressuring up LME prices and P1020 premiums

Executive Summary

1. LME prices bounce back amid demand optimism and steady technical support; upward target of $1,940 per mton holds.

LME 3M aluminum prices closed at a one-week high of $1,809 per mton, up 0.6% or $11 per mton from yesterday. Prices bounced back from yesterday’s three-week low close as they continued to experience technical buying near $1,791 per mton (the 200-day moving average threshold), while demand sentiment firmed a bit up amid fresh cancelations of LME aluminum inventory warrants (which climbed to a two-and-a-half-year high) and stronger-than-expected Chinese trade data. $1,940 per mton remains the next technical target for LME prices.

More details in full report.

2. LME INVENTORY UPDATE. LME aluminum canceled warrants climb to a two-year high, supportive for P1020 spot premiums.

Orders to remove aluminum units from LME warehouses spiked today to a new high since May 2017 of 619,075 mton amid fresh cancelations totaling 35,075 mton. All of the increase took place in Asia, where canceled warrants increased by 25,000 mton in Malaysia, 9,425 mton in South Korea, and 650 mton in Singapore. Fresh cancelations support load-out queues in Port Klang, Malaysia, where canceled warrants have spiked by 235 kmton in the past month and load-out queues as of the end of December were as long as thirty-three working days for one operator. In turn, the lengthening of load-out queues is supportive for spot P1020 premiums.

More details in full report.

3. LME Cash–3M contango recovers from three-week low as Cash-February loosens (remains premium-supportive).

The Cash–3M contango widened today to $26.75 per mton from a three-week low of $23.00 per mton, mainly as the Cash–February contango eased to $10.00 per mton from a one-month low of $6.00 per mton. Meanwhile, the February–March contango narrowed to $9.50 from $10.00 per mton, and the March–April contango held without a change at $7.00 per mton. At the current level the Cash–3M contango remains supportive for spot premiums around the world since it is wide enough for most players to profitably finance short-term cash-and-carry deals.

More details in full report.

4. 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.

5. China’s aluminum prices lose some momentum amid fragile fundamental outlook.

SHFE front-month aluminum prices closed the overnight session practically unchanged at 14,470 yuan per mton ($1,860 per mton, excluding VAT). Prices hardly changed ahead of tomorrow’s settlement of the January 2020 contract amid a weakening technical momentum and expectations of seasonal buildups in domestic visible inventories in the coming weeks.

More details in full report.