Executive Summary
1. LME prices faced intraday selling pressure from lower oil prices but held within the expected resistance/target zone of $1,800–$1,850 per mton.
LME 3M aluminum prices closed the session at a new six-week high of $1,825 per mton, up 0.3% or $5 per mton from yesterday. Prices tested a new six-week intraday high of $1,830 per mton, supported by upbeat short-term technical momentum and declining overall market fear levels, as the Fear/VIX Index reached fresh six-week lows today. However, prices struggled to sustain gains late in the session as oil prices plunged. LME prices remain within the $1,800–$1,850 per mton range, as anticipated.
More details in full report.
2. BAUXITE SUPPLY ALERT. Expecting a bauxite market surplus in 2020–2022 even if Indonesia goes ahead with bauxite export ban.
The Indonesian government is studying the possibility of banning bauxite exports starting January 2020. Indonesian President Joko Widodo was reported saying that the government is analyzing the possibility of banning exports of minerals, including bauxite. This comes after the Ministry of Energy & Mineral Resources announced early this month a ban on nickel exports starting in January 2020, two years earlier than previously announced. A bauxite export ban from Indonesia would not be big enough to push the market into a deficit position, as other bauxite sources have displaced Indonesian bauxite supply relevance.
More details in full report.
3. LME Cash–3M contango widens from six-week lows; nevertheless, a dominant inventory holder emerged earlier this week.
The LME Cash–3M contango widened to $28.25 per mton, from a six-week low of $24.75 per mton yesterday; contangos significantly loosened after September: the September– October contango widened to $12.00 from $10.50 per mton, and the October–November contango widened to $10.50 from $9.00 per mton. However, a dominant concentration of inventory holdings emerged for the first time in three weeks, while there is a relatively high concentration of short positions due on September 18. the above could support narrower nearby spreads into next week when the September’s third-Wednesday contract is due.
More details in full report.
4. China’s aluminum prices again approaching our expected resistance target but are well below highs reached earlier this week.
Prices continued to face resistance after nearing 14,500 yuan per mton. SHFE two-month aluminum prices closed the overnight session marginally higher at 14,400 yuan per mton ($1,791 per mton, excluding VAT), extending gains in after-hours trading to levels as high as 14,490 yuan per mton ($1,802 per mton, excluding VAT). Prices appeared to be supported by ongoing short-term technical momentum and short-covering triggered by recent market talk of potential curbs on bauxite exports from Indonesia.
More details in full report.