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LME prices reach three-week highs but medium-term downward trend remains; MW financials for Q4 2019 at a two-month high

LME prices reach three-week highs but medium-term downward trend remains; MW financials for Q4 2019 at a two-month high

Executive Summary

1. LME prices close up amid a weaker US dollar and falling fear levels; overall bearish trend remains.

LME 3M aluminum prices closed the session up 0.4% or $6.50 per mton at a three-week high of $1,790.50 per mton. Prices increased for the fourth-consecutive session, accumulating a weekly rally of 2.1% (the biggest in seven months), again supported by a weaker US dollar and easing market fear levels. LME prices are currently targeting the $1,800–$1,850 per mton trading range, a relevant threshold from a technical standpoint as: a) it has marked the end of several short-term rallies since May and b) $1,850 per mton represents the 200-day moving average threshold. However, a medium-term technical downward trend remains active.

More details in full report.

2. EUROPEAN BILLET UPDATE. Acquisitions and subcontracting are taking place in Spain and Portugal as extrusion demand looks healthy in the Iberian Peninsula. Demand in Italy and Northern Europe is still in contraction. Spot premiums decline in Northern Europe and Poland.

Strong market rumors indicate a growing extruder in Southern Europe might be looking to expand its presence in the Iberian Peninsula by purchasing an extruder in Portugal. Moreover, we hear from the trade that a Spanish extruder close to a sold-out position has recently subcontracted two other extruders in Portugal to increase its production of 8 inch billet units. Meanwhile, extrusion demand in Italy and Northern Europe remains soft.

More details in full report.

3. CME MW duty-paid financials for Q4 2019 up to a two-month high amid a large transacted volume.

Preliminary data indicates that CME MW duty-paid premium financials for Q4 2019 were transacted today at a two-month peak of 17.48 cent/lb, increasing by 0.05 cent/lb from a week ago. Today’s preliminary volume for these contracts was equivalent to 10,800 mton, the largest daily volume for Q4 2019 contracts on record. The US MW duty-paid financials’ backwardation has intensified once again.

More details in full report.

4. LME Cash–3M contango tightens to a two-week low, still short-term supportive for spot premiums.

The LME Cash–3M contango tightened to a two-week low of $26.50 per mton, from yesterday’s $26.75 per mton; today’s narrowing in the Cash–September’s contango (to $4.75 from $5.75 per mton) more than offset a slight widening in the September– November contango (to $19.25 from $18.50 per mton). However, we estimate that at today’s level, the Cash–3M contango remains supportive for spot premiums around the world (wide enough for most players to profitably finance short-term cash-and-carry deals).

More details in full report.

5. China’s aluminum prices continue to range-trade near an eleven-month high.

Prices fell in after-hours amid end-of-week profit taking. SHFE two-month aluminum prices closed the overnight session up 0.3% at a new eleven-month closing high of 14,390 yuan per mton ($1,789 per mton, excluding VAT). However, gains were quickly reversed in after-hours trading, with prices falling to their lowest intraday levels since Monday (13,280 yuan per mton or $1,775 per mton, excluding VAT) as end-of-week profit-taking selling emerged despite China’s central bank confirming monetary stimulus measures to support credit growth.

More details in full report.