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MW premium H2 2020 financials fall 0.42 cent/lb to 17.0 cent/lb; APEX Act bill gains additional support in Senate

MW premium H2 2020 financials fall 0.42 cent/lb to 17.0 cent/lb; APEX Act bill gains additional support in Senate

Executive Summary

1. LME prices hold within recent range amid weaker US dollar and outlook uncertainty around Brexit and US-China negotiations.

LME 3M aluminum prices closed the session unchanged at $1,728 per mton. Prices traded within a range of $1,714–$1,732 per mton, initially declining due to waning optimism regarding Brexit and US-China trade talks (China threatened strong countermeasures if the US Congress passes legislation supporting Hong Kong), but bouncing back late in the session as President Trump stated that a trade deal with China could be signed next month. As a result, the US dollar fell to a one-month low, also pressured down by disappointing US retail sales data which supported the case for additional interest rate easing. Prices remain in a technical downward trend targeting $1,680 per mton.

More details in full report.

2. CME MW duty-paid financials H2 2020 down to a three-month low of 17.00 cent/lb (backwardation persists).

Preliminary data indicates that CME MW duty-paid premium financials for H2 2020 were transacted today at a three-month low average of 17.00 cent/lb, down from a 17.42 cent/lb average a week ago. Today’s preliminary volume was the largest on record for these contracts, equivalent to 46,875 mton. Meanwhile, preliminary data indicates that CME MW duty-paid premium financials for H1 2020 dropped today to a one-month low of 17.30 cent/lb, from an average of 17.46 cent/lb a week ago.

More details in full report.

3. LME Cash–3M contango narrows to nearly the tightest in nine months amid a widening December–January “back” (bearish premiums).

The Cash–3M contango tightened again to single-digit, to $5.50 per mton from yesterday’s $10.50 per mton, as the December–January backwardation steepened further to $10.00 from yesterday’s $6.00 per mton. Meanwhile, the Cash–December contango held without a change from yesterday at $16.50 per mton. Specifically, the backwardation between December 11, 2019, and January 16, 2020, steepened to $15.50 per mton from a $10.50 per mton “back” on Tuesday.

More details in full report.

4. US MW APEX ACT UPDATE. APEX Act bill gains additional support in Senate after another senator became a cosponsor.

Yesterday, Sen. Jeanne Shaheen (D-NH) became the latest cosponsor of the APEX Act bill that was introduced in June by Sen. Cory Gardner (R-CO) and original cosponsor Sen. Tammy Baldwin (D-WI). Two more Republican senators became cosponsors of the bill in July. Meanwhile in the House of Representatives, there are forty-two bipartisan cosponsors of the bill.

More details in full report.

5. ALUMINUM PRODUCTION ALERT. NALCO confirms production cuts amid temporary coal shortage, negligible market impact.

In a press release issued today (October 16), the company announced that it has idled 80 electrolytic pots, which represents about 40 kmtpy of smelting capacity according to HARBOR'S estimates. The decision was the result of coal supply shortages that have affected Nalco’s captive power plants over the last seven weeks. If coal shortages persist, the company may be forced to curtail another 110 kmtpy, according to our estimates. Negligible impact seen on Western World primary market surplus.

More details in full report.

6. China’s aluminum prices regain some ground but still trade below key support zone.

SHFE December 2019 aluminum prices closed the overnight session up 0.4% at 13,800 yuan per mton ($1,722 per mton, excluding VAT) but were unable to surpass an intraday high of 13,840 yuan per mton ($1,727 per mton, excluding VAT). Prices sustained support from yesterday’s upbeat credit growth from China and rising domestic alumina prices but faced some technical resistance as they approached the 200-day moving average zone while US-China tensions appeared to escalate overnight.

More details in full report.