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LME prices test resistance again amid trade optimism; MW spot premium down amid spread tightness

Executive Summary

1. LME prices continue to face technical resistance above $1,745 per mton but find support from trade optimism.

LME 3M aluminum prices closed the session up 0.5% or $9 per mton at $1,753 per mton. Prices increased along with the industrial commodities complex as: a) the US dollar weakened to a two-week low after President Trump confirmed he will meet with China’s vice premier tomorrow, raising expectations of a partial trade deal, and b) oil prices gained nearly 2% amid talk from OPEC officials about restricting supply. Prices continue to face technical resistance at the $1,745–$1,770 per mton zone.

More details in full report.

2. US MW PREMIUM UPDATE. MW spot premium declines to 16.22–16.33 cent/lb as discounts under journalistic references widen.

HARBOR's US MW P1020 Ingot Duty-Paid Consumer-Supplier Spot Transaction Premium declined today to 16.22–16.33 cent/lb (which equates to discounts of 1.67–1.78 cent/lb below journalistic MW premium references) from the previous range of 16.30–17.20 cent/lb, amid LME prices falling to a thirty-one-month low and tight LME nearby spreads. Meanwhile, term deals for Q4 and early next year have seen an increased demand during the past month, but the mating season for 2020 contracts continues to progress slower than usual.

More details in full report.

3. LME Cash–3M contango tightens as nearby tightness intensifies (bearish for spot premiums); inventory buildups could to extend into next week.

The LME Cash–3M contango narrowed again to an eight-month low of $5.25 per mton from yesterday’s $8.00 per mton, mainly as the Cash–October spread (a one-day spread) turned to a backwardation of $2.00 per mton from yesterday’s contango of $1.50 per mton. Meanwhile, the Tom–Next spread settled at a backwardation of $2.00 per mton, experiencing intraday backwardations as wide as $4.50 per mton. Indeed, conditions remain supportive of LME inventory buildups, which could even intensify next week.

More details in full report.

4. China’s aluminum prices test two-month intraday lows but bounce back, maintaining technical support.

SHFE two-month aluminum prices tested a two-month intraday low of 13,800 yuan per mton ($1,716 per mton, excluding VAT) amid weakening short-term technical momentum and market talk of significant domestic primary aluminum capacity ramp-ups scheduled for this quarter. However, prices later regained some ground amid technical buying and trade optimism, closing the overnight session at 13,900 yuan per mton or $1,729 per mton, excluding VAT (down 0.5% from yesterday).

More details in full report.