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LME prices down, additional selling could be triggered by a bearish close tomorrow

Executive Summary

1. LME prices fell to $1,800 per mton (the low end of our expected resistance zone). A close lower tomorrow could trigger renewed selling pressure targeting again the key threshold of $1,745–$1,770 per mton.

LME 3M aluminum prices closed the session down 1.2% or $22 per mton at $1,803 per mton. Prices declined throughout most of today’s session, reaching levels as low as $1,792 per mton as: a) oil prices reached a new one-week low, and b) the European Central Bank announced fresh monetary stimulus measures, underscoring concerns about the region’s economic outlook and weakening the euro. LME prices seem to be struggling once again to sustain gains within the resistance range of $1,800–$1,850 per mton. Failure to close the week above $1,800 per mton would be a bearish technical signal.

More details in full report.

2 LME Cash–3M contango widens above $30 per mton (supportive for spot premiums) amid loosening conditions after September.

The LME Cash–3M contango loosened today to $31.75 per mton, from yesterday’s $28.25 per mton. Contangos significantly loosened after September for a second-consecutive session, with the September–October contango widening to $13.25 from yesterday’s $12.00 per mton and the October–November contango widening to $13.50 from yesterday’s $10.50 per mton. At its 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.

3. MW Duty-Unpaid P1020 premium down to 8.63–9.48 cent/lb.

HARBOR’s MW Duty-Unpaid Premium (MWP DUP) was assessed today at 8.63–9.48 cent/lb, down from yesterday’s 8.73–9.59 cent/lb amid today’s widening in nearby contangos decreasing the financial cost of metal in transit.

More details in full report.

4. China’s aluminum prices extend gains but remain unable to break through resistance threshold.

SHFE two-month aluminum prices closed the overnight session up 0.3% at 14,450 yuan per mton ($1,806 per mton, excluding VAT) but did not trade in after-hours trading when LME aluminum prices dropped by as much as 1.7% in intraday terms. Overnight, aluminum prices in China were supported by a positive technical momentum and extended yesterday’s gains amid easing trade tensions after the US delayed the impositions of certain additional tariffs on Chinese goods. Note: The SHFE market will be closed tomorrow. Trading will resume on Monday, September 16.

More details in full report.