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MW duty-paid financials for H2 2020 fall to a fresh five-month low of 16.30 cent/lb; China buying North American RSI A380 and ADC12 units

Executive Summary

1. LME price rally pauses near the $1,820–$1,850 per mton target zone.

LME 3M aluminum prices closed the session down 0.2% or $4 per mton at $1,811 per mton. Prices tested a session high of $1,818 per mton buoyed by further signs of stabilization in US economic activity but faced some technical selling toward the end of the session--amid technical resistance at the 200-day moving average threshold and a stronger US dollar. LME prices keep trading just below the key 200-day moving average threshold (currently around $1,820 per mton), and LME prices continue targeting the $1,820–$1,850 per mton zone.

More details in full report.

2. LME December–January backwardation holds near its steepest level in ten months (bearish for premiums).

The Cash–3M backwardation eased slightly to $6.00 per mton from Monday’s $6.25 per mton “back” as the January–3M contango widened to $2.25 from $2.00 per mton. Meanwhile, the Cash–November contango held unchanged at $6.00 per mton, and the December–January backwardation did not change from yesterday’s record high of $16.25 per mton.

More details in full report.

3. CME MW duty-paid financials for H2 2020 fall to 16.30 cent/lb (premium backwardation intensifies).

Preliminary data indicates that CME MW duty-paid premium financials for H2 2020 were transacted today at a new five-month low of 16.31 cent/lb, down 0.20 cent/lb from a week ago and weakening 6.6% or 1.16 cent/lb in one month. Meanwhile, preliminary data indicates that CME MW duty-paid premium financials for H1 2020 declined to a five-month low average of 16.48 cent/lb, down 0.41 cent/lb from a week ago falling 6.2% or 1.09 cent/lb in one month.

More details in full report.

4. US AND MEXICO SECONDARY MARKET ALERT. Chinese consumers expected to take more RSI material from the US and Mexico to replace zorba units. This would lend support to secondary scrap and alloy ingot prices in North America.

We can confirm that more than 200 mton of ADC12 and A380 RSI ingot (combined) have been exported from Mexico to China in the last couple of weeks at prices between 57 and 62 cent/lb delivered at Chinese ports. Volumes are flowing not necessarily because export prices are above the domestic market but because of the poor spot demand in North America. Meanwhile, Chinese consumers are asking US processors to convert zorba into RSI material to be exported. Growing Chinese appetite for North American RSI ingot seems bullish for zorba, twitch, old cast, RSI, and on-spec secondary ingot prices in the US and Mexican markets.

More details in full report.

5. HARBOR’s Implicit Green Aluminum Upcharge was assessed today at zero, unchanged from yesterday’s assessment.

HARBOR’s US MW P1020 Green Aluminum Spot Premium was assessed today at 16.05– 16.20 cent/lb, unchanged from the previous session. Meanwhile, HARBOR's US MW P1020 Ingot Duty-Paid Consumer-Supplier Spot Transaction Premium stands also unchanged at 16.05–16.20 cent/lb (which equates to discounts of 0.80–0.95 cent/lb below current journalistic MW premium references). As a result, HARBOR’s Implicit Green Aluminum Upcharge was assessed today at zero, unchanged from yesterday’s assessment.

More details in full report.

6. China’s aluminum prices rise but remain capped by important technical threshold.

SHFE two-month aluminum prices closed the overnight session up 0.3% at 13,955 yuan per mton ($1,762 per mton, excluding VAT) but continued to lack enough upward momentum to consolidate above the 200-day exponential moving average threshold. Prices remained supported by trade optimism, finding additional support from announcements of an interest rate cut by China’s central bank (supportive for credit growth). SHFE prices have regained short-term upward momentum but remain capped at the 200-day moving average threshold.

More details in full report.