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LME prices supported by economic data; Visible aluminum inventories climb in Asia; More bipartisan lawmakers support APEX Act bill

Executive Summary

1. LME prices bounce back on demand data and erratic trading between $1,800–$1,850 per mton.

LME 3M aluminum prices closed the session up 1.0% or $20 per mton at $1,842 per mton. Prices initially received support from better-than-expected Chinese industrial production and retail sales figures for June, and extended gains later in the session amid upbeat US regional manufacturing activity data. However, gains were capped by technical resistance at the 100-day moving average (currently at $1,840 per mton), falling alumina spot prices, and volatility in oil prices. LME prices continue to behave somewhat erratically, within the $1,800–$1,850 per mton range.

More details in full report.

2. ALUMINA ALERT. Alumina price falls below $300 per mton, nearing HARBOR's target of $270 per mton.

Australia alumina spot prices are down 7% so far July and have fallen 56% since April 2018 to levels below $300 per mton FOB, mostly in a context of: a) a well-supplied global market (as Alunorte ramps up alumina production and Chinese output recovers), and b) lower domestic spot prices in China (down 14% m/m so far July to $330 per mton, ex- works and excluding VAT). HARBOR expects alumina spot prices to ultimately bottom out at levels as low as $250-$270 per mton amid the shift to a growing world alumina production surplus.

More details in full report.

3. LME aluminum inventories surge in Singapore; more deliveries could take place this week.

Today, LME warehouses in Singapore registered a sizeable inflow (warranting) of 26,125 mton. This is the first inflow into the LME system in two weeks and only the second one since May 9, 2019. Further inflows could follow this week (ahead of Wednesday’s monthly prompt-date).

More details in full report.

4. LME Cash–3M contango remains unattractive for most players; concentrated holdings of live warrants persist.

The LME Cash–3M contango narrowed to $18.00 per mton from $19.75 per mton, amid a significant tightening in the September–October contango from $4.50 per mton to $2.25 per mton. Meanwhile, the July–August contango narrowed to $10.25 per mton from $10.50 per mton, and the August–September contango eased to $5.50 per mton from $5.00 per mton. As a result, 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.

5. US MW APEX ACT UPDATE. Bipartisan support for APEX Act grows in the House.

On Friday, four House members added their support to the APEX Act: Rep. Joyce Beatty (D- OH), Rep. Kenny Marchant (R-TX), Rep. Danny K. Davis (D-IL), and Rep. Jim Jordan (R-OH). The APEX Act (H.R. 1406 bill), which was introduced in February by Rep. Al Lawson Jr. (D- FL) and Rep. Ken Buck (R-CO), now has the support of twenty-seven cosponsors, of which fifteen are Republicans and twelve are Democrats.

More details in full report.

6. China’s aluminum prices rebound on demand indicators; technical momentum still on the downside.

SHFE two-month aluminum prices closed the overnight session up 0.5% at 13,825 yuan per mton ($1,779 per mton, excluding VAT), extending gains in after-hours until nearing 13,900 yuan per mton ($1,788 per mton, excluding VAT). Prices increased along with the Shanghai base metals complex, supported by stronger-than-expected data for Chinese industrial production and fixed-assets investments in June which somewhat eased concerns from an anticipated year-to-year slowdown in GDP growth.

More details in full report.