Subscription inquiry

Technical buying emerges at $1,770 per mton support; US MW P1020 and PFA premiums plummet

Executive Summary

1. LME prices fall to levels below $1,770 per mton support but failed to maintain them.

LME 3M aluminum prices closed the session at $1,778 per mton, hardly changed from yesterday (down 0.1%). During the first half of the session, prices extended yesterday’s sell-off and reached levels as low as $1,765 per mton. However, they managed to bounce back during the second half of the session as technical buying emerged at our identified support zone of $1,745–$1,770 per mton, while the US dollar backed off from a one- month high reached earlier in the session. Technical support is expected at the $1,745– $1,770 per mton range.

More details in full report.

2. US MW PREMIUM ALERT. MW spot premium between suppliers plummets to a 20-month low amid sharp backwardation and Section 232 exemptions.

HARBOR's US MW P1020 Ingot Duty-Paid Supplier-Supplier Spot Transaction Premium plummeted to a 20-month low of 14.50-15.50 cent/lb, down from a previous range of 17.40-17.53 cent/lb. The US MW duty-paid spot premium transacted among suppliers has fallen sharply amid the emergence of sharp LME backwardation and Section 232 exemptions that have promoted discounts. This in a context of a growing excess of aluminum units.

More details in full report.

3. US PFA ALERT. US PFA spot premiums fall to decade lows despite Section 232 Tariff.

The US PFA spot market is aflush with unit’s availability from domestic and offshore suppliers alike, looking to allocate units in a clearly oversupply market, which we estimate has 30-50 kmton of currently unsold North American PFA capacity. Looking ahead, we expect the 2020 PFA contractual premiums to decline as much as 3.5 cent/lb y/y.

More details in full report.

4. LME Cash-3M spread flattens to zero as December–January “back” eases to a two-week low (still unsupportive of premiums).

The Cash–3M spread flattened to zero from yesterday’s backwardation of $2.50 per mton, as spread tightness eased after November’s prompt date. Today, the November–December contango widened to $4.50 from $2.50 per mton, the December–January backwardation eased further to a two-week low of $13.50 from $14.50 per mton, and the January–3M contango loosened to $6.50 from $6.25 per mton. Nevertheless, the Cash–3M spread remains short-term bearish for spot premiums around the world.

More details in full report.

5. HARBOR’s Implicit Green Aluminum Upcharge 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 0.55–0.70 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 down on profit-taking selling.

SHFE two-month aluminum prices closed the overnight session down 0.7% at 13,870 yuan per mton ($1,751 per mton, excluding VAT), testing in after-hours trading levels as low as 13,780 yuan per mton ($1,740 per mton, excluding VAT). Prices fell for the second- consecutive session, accumulating a decline of as much as 2.4% since Friday amid profit- taking selling and resurging demand growth concerns resulting from disappointing recent domestic economic data. There seems to be an important component of profit-taking selling in this week’s SHFE price correction, as suggested by the number of open contracts falling by 4.7% from a six-week high reached last Wednesday.

More details in full report.