Subscription inquiry

LME prices down after hitting expected resistance; MW financials for H1 2020 plummet to a seven-week low

Executive Summary

1. LME prices reversed most of yesterday’s gains as resistance prevails at $1,850 per mton (as anticipated); short-term reversal toward $1,750–$1,800 per mton still in the cards.

LME 3M aluminum prices closed the session down 1.2% or $22 per mton at $1,828 per mton. Prices formed a bearish intraday double-top pattern at $1,850 per mton, retreating to intraday levels as low as $1,823 per mton as selling pressure intensified (as expected) given long profit-taking and new shorts. In fact, aluminum prices underperformed relative to oil prices and the base metals complex--which hovered around multi-week peaks reached yesterday. A medium-term technical downward trend is still in place; revisit of $1,750–$1,800 per mton continues to appear likely.

More details in full report.

2. CME MW duty-paid financials for H1 2020 down considerably to 17.00 cent/lb.

Preliminary data indicates that CME MW duty-paid premium financials for H1 2020 dropped to a seven-week low of 17.00 cent/lb, weakening by 0.20 cent/lb from yesterday, and down 0.50 cent/lb from a week ago, at a time when spot premiums are already experiencing downward pressure from an ongoing oversupply of primary aluminum units. Today’s preliminary transacted volume for these contracts was equivalent to 6,000 mton. Meanwhile, preliminary data indicates that CME MW duty-paid premium financials for H2 2019 quoted at an average of 17.56 cent/lb, unchanged from yesterday but down 0.21 cent/lb from a week ago.

More details in full report.

3. LME Cash–3M contango widens but remains somewhat bearish for spot premiums around the globe.

The LME Cash–3M contango widened to $20.50 per mton from $17.00 per mton, as contangos eased after July for a second-consecutive session: the July–August contango eased to $9.50 from $9.00 per mton, the August–September contango widened to $5.50 from $4.00 per mton, and the September–3M contango eased to $4.50 from $1.50 per mton. Nevertheless, we estimate that the Cash–3M contango continues to be unsupportive of cash-and-carry deals for most players (bearish for spot premiums as the financing of metal becomes uneconomic).

More details in full report.

4. China’s aluminum prices reverse yesterday’s gains and could activate new bearish signals tomorrow.

SHFE two-month aluminum prices dropped by as much as 1.4% in intraday terms, falling from levels just above 13,900 yuan per mton ($1,790 per mton, excluding VAT) to levels as low as 13,730 yuan per mton ($1,768 per mton, excluding VAT) in after-hours trading. Prices faced downward pressure from a) selling activity triggered after nearly reaching their 200-day exponential moving average threshold yesterday, b) falling LME aluminum prices, and c) a reported rebound in China’s visible primary aluminum inventories (which posted the first net weekly inflow in four months). SHFE aluminum prices could activate a fresh medium-term bearish signal tomorrow.

More details in full report.