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LME prices fall towards target while visible inventory buildups intensify; Chinese semis exports plummet y/y on weak prices and demand

Executive Summary

1. LME prices fall and continue to approach our expected $1,680 per mton target, technical indicators and market sentiment remain bearish.

LME 3M aluminum prices closed the session marginally lower, down 0.1% or $2 per mton at $1,720 per mton. Prices dropped to a seven-session intraday low of $1,710 per mton, just above thirty-two-month lows of $1,705 per mton reached earlier this month, amid: a) downward technical momentum; b) global demand growth concerns amid disappointment from US-China trade negotiations; and c) sustained LME inventory buildups in Asia fueling bearish aluminum market sentiment. A technical target of $1,680 per mton is still in place.

More details in full report.

2. LME inventory buildups intensify as anticipated; Cash–3M contango loosens but remains unsupportive for spot premiums.

LME warehouses in Asia experienced another sizeable inflow today (the fifteenth straight), totaling 13,200 mton across Singapore and Port Klang (Malaysia). As a result, the cumulative inflow of 141,275 mton since September 24 remains the largest since July 2019 when a total of 183,000 mton were delivered to LME warehouses in Asia. Meanwhile, nearby tightness persists ahead of this week’s third-Wednesday prompt date amid concentrated shorts and warrant holdings. However, the Cash–3M contango loosened from its tightest level in nine months.

More details in full report.

3. CHINESE ALUMINUM EXPORTS UPDATE. Semis exports fall amid a narrower arbitrage window and subdued ROW demand.

In September, Chinese aluminum exports contracted by the steepest annual rate in almost three years. According to preliminary data, Chinese exports of unwrought and semi-fabricated aluminum products plunged by 14.7% y/y to a seven-month low of 5.3 million mton annualized. Nevertheless, year-to-date volumes remained at a record high, having accumulated an increase of 2.9% y/y (or 165 kmton) from the January–September 2018 period. A narrower arbitrage window and weaker overseas demand have contributed to the decline.

More details in full report.

4. China’s aluminum prices hit a three-month low, could soon unleash a new downward target.

SHFE two-month aluminum prices closed the overnight session at 13,760 yuan per mton ($1,723 per mton, excluding VAT), down 0.6% from Friday. Prices initially tested a three- month intraday low of 13,720 yuan per mton ($1,718 per mton, excluding VAT) amid downbeat trade and auto sales data from China. However, prices found some support from reports of resuming net withdrawals in domestic primary aluminum visible inventories and increasing domestic alumina spot prices. SHFE prices continue to trade below the 200-day moving average support zone but have yet to confirm a technical breakout.

More details in full report.