Subscription inquiry

LME inventories up to an eight-year high amid growing oversupply

Executive Summary

1. LME prices pull back on profit taking and continued inventory buildups.

LME 3M aluminum prices closed the session down 0.4% or $7 per mton at $1,768 per mton. In weekly terms, prices closed only 0.2% or $3 per mton higher as they gave back on Friday some of the gains experienced in the previous two sessions. Today, aluminum prices pulled back from an intraday high of $1,782 per mton reached early in the session, falling along with copper and equity markets as the contents of the Phase One deal appeared to underwhelm expectations. Moreover, LME aluminum inventories in Asia climbed to a new eight-year high (bearish for LME prices).

More details in full report.

2. LME INVENTORIES UPDATE. LME aluminum inventories in Asia rise to an eight-year high as the nearby backwardation continues to trigger deliveries.

Asian LME aluminum inventories stand today at their highest since 2011. LME inventories in Asia reached their highest mark in eight years today after experiencing buildups for a twelfth-consecutive session—warehouses in Malaysia received fresh inflows totaling 32,975 mton today, of which 27,775 mton were delivered in Port Klang and 5,200 mton in Johor. As a result, total LME inventories increased to a twenty-month high of 1,375,675 mton, while live inventories (i.e., excluding canceled warrants) climbed to a new two-year high of 1,263,925 mton.

More details in full report.

3. US TARIFFS UPDATE. US Section 301 tariffs on Chinese aluminum imports likely to be reduced to 7.5% amid Phase One trade agreement.

The US Trade Representative Office (USTR) announced that as part of the Phase One trade agreement announced today, the US “will be maintaining 25 percent tariffs on approximately $250 billion of Chinese imports, along with 7.5 percent tariffs on approximately $120 billion of Chinese imports.” According to our understanding, this means that products impacted by the latest tranche of tariffs (implemented in September) will have their respective duties halved from the current 15%. Therefore, the reduction will most likely impact aluminum products. Official confirmation and signing of the deal is still pending.

More details in full report.

4. LME Cash–3M contango narrows as the December–January backwardations persists.

The LME Cash–3M contango narrowed today to $11.65 per mton from Thursday’s ten- week high of $13.25 per mton. Nearby conditions tightened through January, as the December–January backwardation intensified to $7.00 from yesterday’s three-month low of $5.00 per mton and the Cash–December contango narrowed to $0.65 per mton from yesterday’s $1.25 per mton. Meanwhile, the January–February contango widened to a record high of $10.50 per mton from yesterday’s $9.75 per mton.

More details in full report.

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

HARBOR’s US MW P1020 Green Aluminum Spot Premium was assessed today at 12.05– 13.05 cent/lb, unchanged from the previous session. HARBOR's US MW P1020 Ingot Duty- Paid Consumer-Supplier Spot Transaction Premium also stands unchanged at 12.05–13.05 cent/lb. As a result, HARBOR’s Implicit Green Aluminum Upcharge was assessed today at zero, unchanged from the previous assessment.

More details in full report.

6. China’s aluminum prices remain stuck at the 200-day moving average zone.

SHFE December 2019 aluminum prices closed the overnight session down 0.3% at 14,010 yuan per mton ($1,775 per mton, excluding VAT) and extended losses in after-hours trading until testing a near-two-week low of 13,960 yuan per mton ($1,769 per mton, excluding VAT). Prices were pressured down by technical selling activity and losses across the base metals complex amid apparent disappointment regarding the details of the Phase One trade agreement announced today. SHFE prices continue to face resistance around the 200-day moving average zone.

More details in full report.