Executive Summary
1. LME prices down to a one-week low as risk aversion intensifies amid US-China trade frictions.
LME 3M aluminum prices closed the session down 0.7% or $12 per mton at a one-week low of $1,795 per mton. Prices held within a relatively narrow band of $1,794–$1,807 per mton but closed near a session low as the ongoing escalation of trade frictions between the US and China resulted in: a) the VIX/Fear Index climbing to a two-week high, b) the US dollar approaching new two-year highs, and c) oil prices falling by 2% to a new two- month low (bearish for aluminum smelting costs). For now, prices remain in a medium- term bearish trend and continue to lack a clear bottoming-out formation.
More details in full report.
2. LME Cash–3M contango narrows slightly but remains premium supportive; holdings of live inventories seem to remain highly concentrated.
The LME Cash–3M contango narrowed to a new three-week low of $28.75 per mton from $29.00 per mton, mainly as a narrower July–August contango (which tightened to $10.50 from $11.00 per mton) more than offset at wider June–July contango (which loosened to $9.00 from $8.75 per mton. The Cash–3M contango continues to be supportive for spot premiums, as it is wide enough for most players to profitably finance short-term cash- and-carry deals. Nevertheless, holdings of live inventories seem to remain highly concentrated (nearby contangos could narrow ahead).
More details in full report.
3. MEXICO FOIL ALERT. Mexico imposes preliminary antidumping duties on imports of foil from China (one week after getting exempted from Section 232).
The Mexican government confirmed last Friday the imposition of preliminary antidumping duties on imports of aluminum foil from China. Preliminary duties became effective on Saturday, May 25, about a year after a domestic foil manufacturer requested the investigation, which was subsequently launched in August 2018. The product impacted by this resolution is aluminum foil of a thickness not over 0.080 mm—falling under tariff line 7607.11.01, which is considered medium-to-light gauge foil of alloy series 1xxx, 3xxx, and 8xxx. Resolution seen by market participants as more politically driven than technically robust.
More details in full report.
4. China’s aluminum prices drop as demand concerns resurge.
SHFE two-month aluminum prices fell from an intraday high of 14,300 yuan per mton ($1,830 per mton, excluding VAT) to end the after-hours session at 14,150 yuan per mton ($1,811 per mton, excluding VAT). Prices fell along with the Shanghai base metal complex amid escalating US-China trade tensions and expectations for Chinese manufacturing sector to fall back into contraction mode (official May data is due tomorrow night). Technically, SHFE aluminum prices are in an upward trend, targeting expected resistance at 14,500 yuan per mton ($1,860 per mton, excluding VAT).
More details in full report.