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LME prices hold just above key support at $1,770 per mton; longer-term spreads remain supportive of premiums

Executive Summary

1. LME prices faced resistance at $1,800 per mton; the jury is still out regarding a potential downward break to as low as $1,550 per mton.

LME 3M aluminum prices closed the session at $1,778 per mton, up 0.2% or $3 per mton from yesterday. Prices initially climbed to a one-week intraday high of $1,797.50 per mton, rising along with the base metals complex after China announced measures to encourage local infrastructure spending. However, aluminum prices gave back most of the previously gained ground as profit-taking selling emerged, while President Trump continued to threaten to hike tariffs on China and pressured the Fed to lower interest rates. For now, LME aluminum prices remain in a medium-term bearish trend, but $1,770 per mton holds as a key support threshold.

More details in full report.

2. LME longer-term contango loosens further (supportive for premiums); nearby spreads remain relatively wide as well.

LME longer-term contangos widened further to a three-month high. The 3M–15M contango widened to a three-month high of $100.75 from yesterday’s $100.25 per mton (a 5.7% yield). After three years of insufficient spreads to offset the cost of carry, longer-term spreads have stood lately at practically break-even levels for the most competitive players (i.e., those with access to the lowest financing and storage costs). This is medium-term supportive for physical premiums. Meanwhile, the LME Cash–3M contango narrowed slightly to $29.75 per mton from yesterday’s $30.25 per mton, and continues to be supportive for spot premiums, as 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 marginally up to 8.53–9.09 cent/lb.

HARBOR’s MW Duty-Unpaid Premium (MWP DUP) was assessed today at 8.53–9.09 cent/lb, marginally up from yesterday’s 8.52–9.07 cent/lb amid another slight tightening in nearby contangos, which increases the financial cost of metal in transit.

More details in full report.

4. China’s aluminum prices regain some ground after testing key support threshold.

SHFE two-month aluminum prices closed the overnight session up 0.4% at 14,005 yuan per mton ($1,793 per mton, excluding VAT) and extended gains in after-hours trading until reaching 14,080 yuan per mton ($1,803 per mton, excluding VAT). After testing a near-two-month low yesterday, prices regained some ground along with the Shanghai base metals complex due to reports of fresh economic stimulus in China to support infrastructure investment. SHFE aluminum prices trade near key technical support, at their 200-day moving average (which stands around 13,975 yuan per mton or $1,785 per mton, excluding VAT).

More details in full report.