Subscription inquiry

LME prices stuck around $1,820 resistance; LME “back” steepens further (bearish premiums); Europe’s 2020 slab contracted volumes fall

Executive Summary

1. LME prices struggle to extend gains, still trading just below their expected target zone ($1,820–$1,850 per mton).

LME 3M aluminum prices closed the session at $1,810 per mton, down 0.1% or $1 per mton from yesterday. After failing to extend gains during the first half of the session, prices tested levels as low as $1,796 per mton amid easing optimism about US-China trade talks and technical profit-taking selling. Nevertheless, prices managed to regain some ground before the end of the session amid a weaker US dollar. Prices are facing resistance at our identified target zone of $1,820–$1,850 per mton.

More details in full report.

2. LME December–January backwardation steepens (bearish for premiums).

The Cash–3M backwardation steepened again to $6.25 per mton from Tuesday’s $6.00 per mton, as the December–January backwardation intensified to a new record high of $17.00 per mton from yesterday’s $16.25 per mton. Meanwhile, the Cash–November contango narrowed to $5.50 from $6.00 per mton, and the November–December contango slightly eased to $2.75 from $2.00 per mton. Spread tightness seems unlikely to dissipate soon amid concentration of shorts due in December–January.

More details in full report.

3. EUROPE SLAB ALERT. Slab volumes contracted for 2020 decline y/y amid uncertain outlook, premium levels unchanged; Consumers plan to be more active in spot market.

Most 2020 European slab contracts are already closed, with confirmed premium levels generally aligned with 2019. We can confirm various consumers planned to decrease their 2020 contracted volumes (compared to 2019 levels) even below their annual forecasted needs, in an effort to be more active in the spot market next year, which is expected to be competitive amid softening demand prospects and plenty of availability.

More details in full report.

4. China’s aluminum prices test a new one-month intraday high; technical resistance prevails for now.

SHFE two-month aluminum prices closed the overnight session at 13,955 yuan per mton ($1,765 per mton, excluding VAT), unchanged from yesterday. Prices tested a one-month intraday high of 14,000 yuan per mton ($1,770 per mton, excluding VAT) but were unable to sustain gains amid technical selling around the 200-day exponential moving average threshold.

More details in full report.