Subscription inquiry

LME prices capped by inventory buildups; Cash–3M spread returns to contango (supportive of premiums)

Executive Summary

1. LME prices hardly changed as inventory buildups in Asia cap gains, range-trading with support at $1,740 per mton continues.

LME 3M aluminum prices hardly changed during today’s session, closing at $1,755 per mton (down 0.1% or $2 per mton from yesterday). Prices traded within a narrow range of $1,749–$1,767 per mton, initially bolstered by better-than-expected Chinese credit growth figures but eventually faced some downward pressure from concerns about inventory buildups. LME warehouses in Malaysia and South Korea registered today a combined buildup of 20,000 mton, the biggest inflow in the region thus far in December, while there remains a significant likelihood of continued deliveries into next week (as a steep December–January backwardation persists).

More details in full report.

2. LME aluminum inventories reach an eleven-month high while live stocks hit a two-year high.

LME inventories in Asia experienced buildups for a ninth-consecutive session, totaling 20,000 mton today after locations in Malaysia received fresh inflows of 17,000 mton and warehouses in Gwangyang, South Korea experienced an inflow of 3,000 mton. As a result, total LME inventories increased to an eleven-month high of 1,303,975 mton, while live inventories (i.e., excluding canceled warrants) increased to a twenty-one-month high of 1,162,450 mton.

More details in full report.

3. LME Cash–3M spread returns to a narrow contango for the first time in three weeks (supportive for spot premiums).

The LME Cash–3M spread settled in contango for the first time in three weeks, at $3.50 per mton from yesterday’s backwardation of $3.00 per mton. This was mainly the result of a looser Cash-December spread, which eased to a contango of $0.25 per mton from yesterday’s backwardation of $5.00 per mton. Meanwhile, the December–January backwardation remained steep but narrowed to $13.00 from $14.00 per mton, while the January-February contango was unchanged at $10.00 per mton.

More details in full report.

4. 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.

5. China’s aluminum prices testing three-week highs amid upbeat economic data.

SHFE December 2019 aluminum prices closed the overnight session up 0.3% at a three- week high of 14,075 yuan per mton ($1,771 per mton, excluding VAT), sustaining initial gains on better-than-expected credit growth data as Chinese new yuan loans increased more than expected in November. Nevertheless, the upside continued to be capped by: a) technical resistance around 14,100 yuan per mton ($1,774 per mton, excluding VAT) and b) uncertainty about the potential imposition of US tariffs against China at the end of the week.

More details in full report.