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LME prices gather upward momentum; Japanese flat rolled product shipment plummet

LME prices gather upward momentum; Japanese flat rolled product shipment plummet

Executive Summary

Special Note: HARBOR’s Daily Aluminum Commentary will not be published on Thursday, November 28 due to the Thanksgiving Day holiday.

1. LME prices climb to a two-week high, consolidating support at $1,740 per mton and heading toward next resistance target of $1,820 per mton.

LME 3M aluminum prices closed the session up 0.6% or $11 per mton at a two-week high of $1,764 per mton. Prices remained supported by technical buying. Moreover, expectations of an interim trade deal between the US and China were reinforced by remarks made yesterday by President Trump, while US economic data remained stronger than expected. Additionally, LME inventories did not experience further buildups. We now expect prices to trade within the $1,740–1,940 per mton range.

More details in full report.

2. JAPAN ROLLING MILL ALERT. Japanese aluminum flat-rolled product shipments fall the most in nine years amid underlying demand contraction and growing imports from China.

In October, shipments of aluminum flat-rolled products by Japanese producers experienced its sharpest annual decline in nearly nine years, contracting by 12.6% y/y, according to data released today by the Japan Aluminum Association. Deliveries to the automotive sector by domestic producers fell annually for the first time in twenty-one months, while deliveries to the packaging sector continued to contract annually. Moreover, Imports of aluminum FRP are expanding at a double-digit annual rate, bolstered by growing imports from China, which grew by 37% y/y in Q3 2019. In turn, FRP exports remain subdued amid smaller volumes to China.

More details in full report.

3. LME December–January backwardation holds steady while longer-term spreads continue to be their tightest since September (unsupportive for spot premiums).

The Cash–3M backwardation eased slightly to $10.50 per mton from $11.00 per mton yesterday as a result of a narrower Cash–December backwardation (at $4.50 from $6.00 per mton yesterday). Nevertheless, the December–January "back" widened for the first time since last week to $13.75 from $13.00 per mton yesterday. This continues to be short-term bearish for spot P1020 premiums across the board.

More details in full report.

4. ALUMINA ALERT. Alumina prices fall further and reach HARBOR's target.

As HARBOR anticipated, Australia alumina spot prices have continued to decline and have reached a fresh 2.5-year low, falling by 61% since April 2018 to $276 per mton FOB amid a well-supplied global market and lower domestic spot prices in China. HARBOR sees Australia alumina prices in a bottoming-out process, strongly supported by the $240-$270 per mton range, as the market is turning into a more balanced position, Chinese demand for imported alumina is picking up, and alumina production in China is contracting in annual terms. Alumina is primary aluminum’s most important cost component.

More details in full report.

5. China’s aluminum prices down to one-week low, still below important resistance zone.

SHFE December 2019 aluminum prices closed the overnight session down 0.2% at a one- week low of 13,870 yuan per mton ($1,746 per mton, excluding VAT), remaining just below this mark in after-hours trading. Prices faced downward pressure from demand growth concerns after data indicated that domestic industrial profits contracted in October at the sharpest annual pace since 2011. Technical support stands around 13,720 yuan per mton ($1,730 per mton, excluding VAT).

More details in full report.