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LME prices defend support at $1,800 per mton; MW financials backwardation intensifies; European spot billet premiums fall further

Executive Summary

SPECIAL NOTE: HARBOR’s Daily Aluminum Commentary will not be published on Monday, September 16.

1. LME prices resume gains, holding within the expected trading range of $1,800–$1,850 per mton amid trade optimism and weaker US dollar; while a bearish weekly close was averted, risks of a new leg down are still present.

LME 3M aluminum prices closed the session at $1,810 per mton, up 0.4% or $7 per mton from yesterday. Prices recovered from a session low around $1,792 per mton, on the back of: a) easing trade war fears, b) better-than-expected US retail sales and consumer sentiment data, and c) a weaker US dollar. Oil prices, which pressured down aluminum throughout the week, continued to experience moderate losses but held above yesterday’s lows. The weekly close above the $1,800 per mton mark (for the first time in seven weeks) is constructive for the ongoing short-term upward trend. However, risks of a new leg down are still present.

More details in full report.

2. CME MW duty-paid financials for Q1 2020 increase to a two-month high; MW financials backwardation intensifies further.

Preliminary data indicates that CME MW duty-paid premium financials for Q1 2020 were transacted today at a two-month peak of 17.43 cent/lb, increasing by 0.08 cent/lb from yesterday and 0.16 cent/lb higher than a week ago. Meanwhile, preliminary data indicates that CME MW duty-paid premium financials for December 2019 were transacted today at a two-month high of 17.50 cent/lb. US MW duty-paid financials’ backwardation has intensified further.

More details in full report.

3. Oversupply pushes US A380 price below 60 cent/lb for the first time in over ten years.

HARBOR's US spot A380 prices delivered Midwest fell today to 58-62 cent/lb from 62-64 cent/lb. HARBOR has confirmed spot volume sold this week at 58 cent/lb, a ten year low. LME NASAAC prices are trading at 48 cent/lb (equivalent to around 60 cent/lb delivered Midwest), also near a ten-year low. North America's secondary market is in a growing oversupply position which is likely to worsen in 2020. Nevertheless, journalistic A380 price references are still in the mid-60s cent/lb, which is 6 cent/lb higher than the HARBOR reference. Although journalistic references could plummet ahead, the downside for secondary scrap prices seems limited.

More details in full report.

4. Granges recovering from lost production, may impact market supply by 6 kmton in Q3.

Granges reported temporary production issues at their Huntingdon and Salisbury rolling mills during July and August that are expected to led to a loss of around 6 kmton during Q3 2019 of heavier gauge foil that HARBOR understands supplies the fin stock, HVAC, and semi-rigid container markets. The loss of production stemmed from both equipment and production issues. The overall impact of the expected 6 kmton will be limited.

More details in full report.

5. EUROPEAN BILLET UPDATE. Spot billet premiums fall to as low as $310 per mton in Southern Europe; HAI increases footprint in Romania

Spot billet premiums fall further in Italy, Spain, Portugal, and Northern Europe as oversupply continues to bite. Recently confirmed spot transactions have now pushed the low end of the premium range to as low $310 per mton in Italy, $320 in Spain, and $330 per mton in Portugal. Moreover, it is important to note that we have also heard of still unconfirmed transactions below this new premium. Meanwhile, the Northern European spot billet premium range has now declined to $340–$360 per mton. Moreover, we expect regional spot billet premiums to remain subdued in the coming months

More details in full report.

6. LME Cash–3M contango widens to sixteen-week high; however, longer-term spreads tighten as December 2019–January 2020 backwardation intensifies to double digits.

Driven by a wide September–October contango, the LME Cash–3M contango loosened today to the widest in sixteen weeks, settling at $33.25 from yesterday’s $31.75 per mton. The September–October contango widened to $14.00 per mton (a record-high for this spread) from yesterday’s $13.25 per mton. At today’s 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. However, the December 2019–January 2020 backwardation intensified today to $10.00 from $7.00 per mton yesterday.

More details in full report.

7. MW Duty-Unpaid P1020 premium down to a one-month low of 8.59–9.35 cent/lb.

HARBOR’s MW Duty-Unpaid Premium (MWP DUP) was assessed today at 8.59–9.35 cent/lb, down from yesterday’s 8.63–9.48 cent/lb amid today’s further widening in nearby contangos decreasing the financial cost of metal in transit.

More details in full report.

8. The Shanghai Futures Exchange (SHFE) was closed today due to the Mid-Autumn Festival holiday. Trading activity will resume on Monday, September 16.

More details in full report.