Aluminum Investment funds have dramatically slowed their buying of LME aluminum. Last week, investment funds, generally speculators in metals markets, purchased only 400 contracts (net), bringing their total net long position to about 102,860 contracts. This was the lowest amount of purchasing week-over-week since they began building this long position in early March. As for price action, the benchmark 3M contract has closed lower for the past three weeks, suggesting that investment fund buying has done little to boost prices. (Source: LME) |
Aluminum prices also slipped in the latter half of the week on renewed fears that the US Federal Reserve could keep interest rates higher for longer than initially expected. On Tuesday, Minneapolis Federal Reserve President Neel Kashkari stated that the US Federal Reserve could keep interest rates at the current level for an "extended period," and maybe through the end of 2024. Before supporting rate cuts, Kashkari stated, "I would need to see multiple positive inflation readings suggesting that the disinflation process is on track." (Source: Reuters) The US might put a 43.5% import tariff on certain South Korean aluminum extrusion products and companies, according to South Korean sources. The tariffs will range from 0% to 43.5%, depending on the company, the sources stated. It is currently unclear how this might impact aluminum imports from South Korea. Last year, the US imported a total of 115,000 mt of aluminum products from South Korea (including extruded products). This represented about 2% of the US’s total aluminum imports (across all products). (Sources: US Census Bureau, MT Newswires (via Bloomberg)) |
Copper Unlike aluminum, investment funds have yet to slow their buying of LME copper. Last week, investment funds purchased roughly 3,700 net contracts, increasing the total to 59,380 contracts, another new all-time high. Even though changes in investment fund positioning are normally positively correlated with prices, the benchmark 3M contract fell by about 0.5% last week while funds were adding to this long position. (Source: LME) Glencore is now eyeing copper miner Anglo American for a potential buyout, according to Reuters and Bloomberg reports. Based on comments from Glencore, the discussions are preliminary and internal, and might not result in an offer. Anglo American has been struggling in recent years and became a takeover target for some of the world’s copper miners and trading houses. Last late month, BHP made a $38.9 billion offer for Anglo American, which Anglo quickly rejected. (Source: Bloomberg) Freeport McMoran expects to export 900,000 mt of copper concentrate from Indonesia in 2H2024, unnamed sources told Reuters earlier this week. Freeport’s export license with the country was set to expire this month but has since been extended after positive talks with the Indonesian government. In 2020, Indonesia banned raw material exports but allowed companies such as Freeport to maintain export quotas while their smelters were under construction. Freeport’s Indonesian copper smelter is set to open this month but won’t reach full capacity until later in the year. (Source: Reuters) Due to lower energy and electricity prices, Aurubis, Europe’s largest copper producer, reported a small 2% increase in core profits for the first half of 2023/2024 compared to last year. Core profits (operating earnings before taxes) were 243 million euros, while total revenue was 8.25 billion euros. Revenue fell due to lower copper prices and sales volumes. The company also stated that construction sector demand was “muted.” (Source: Reuters) |
Other Important LME and CME Metals & Markets
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LME Aluminum |
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LME Aluminum 3M settled at $2,529.5/mt, down $22/mt on the week. Aluminum prices were down this week. Compared to last week, the futures forward curve has shifted vertically lower by approximately $20/mt. It remains in a steep contango, meaning nearby prices are lower than forward prices. Aluminum consumers concerned about increasing prices might consider hedging future needs by buying swaps or call options. Depending on risk tolerance, end-users might consider strategies that use only swaps or options or a combination of both. The aluminum market has sufficient liquidity to use swaps and options. Please get in touch with AEGIS for specific strategies that fit your operations. |
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Midwest Premium |
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Prompt month CME MWP last traded/settled at 19.6¢/lb this week. The CME Midwest Premium market is now in a contango from the May ‘24 contract on forward. The CME Midwest Premium swap market is thinly traded, with no options market. Hedging in this thinly traded market is challenging, so we recommend using limit orders. Please get in touch with AEGIS for specific strategies that fit your operations. * Please note all these charts are for desktop only. * |
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LME Copper |
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LME Copper 3M settled at $10,004/mt, up $94/mt on the week. Compared to last Friday, LME Copper's forward curve has shifted vertically higher by approximately $95/mt and remains in contango throughout 2024 and 2025. The copper market has sufficient liquidity to use swaps and options. Depending on their risk tolerance, consumers might consider strategies that use only swaps, options, or a combination of both. Please get in touch with AEGIS for specific strategies that fit your operations.
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LME Nickel 3M settled at $18,952/mt, down $285/mt on the week. As prices were down this week, nickel’s forward curve has also shifted vertically lower by about $285/mt. It remains in a steep contango, meaning that nearby prices are lower than futures prices. The nickel market has sufficient liquidity to use swaps and options. Depending upon your risk tolerance, consumers might consider strategies that use only swaps or options or a combination of both. Please get in touch with AEGIS for specific strategies that fit your operations. |
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CME Hot Rolled Coil (HRC) Steel |
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Prompt month HRC Steel last traded/settled at $780/T, down $33/T on the week. Steel mill profit margins improved dramatically throughout 3Q and 4Q2023 and are also starting 2024 on a good note. The CME HRC Steel – CME MW Busheling Fe Scrap spread, which is generally used as a gauge for steel mill profitability, is now approximately $390/st, up from about $320/st on September 1. This is mainly due to decreasing scrap prices. Thus, steel mills should consider hedging production and raw material usage for 2024. For most steel producers, this would consist of buying CME MW Busheling Scrap swaps and selling CME HRC swaps. Options are available for CME HRC, but they are relatively illiquid. Please get in touch with AEGIS for specific strategies that fit your operations. |
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AEGIS Insights |
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5/8/2024: AEGIS Factor Matrices: Most important variables affecting metals prices 4/25/2024: Mexico's New Tariffs on Steel and Aluminum Imports Create Uncertainty in US Markets 4/3/2024: Important US Economic Data (AEGIS Reference) 2/27/2024: Aluminum Consumers Should Still Implement Hedges, Even Though Russia Sanctions Mean Little |
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Notable News |
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5/8/2024: Fed may need to hold rates steady all year, Kashkari says 5/8/2024: Lower energy prices help copper producer Aurubis' first-half profit 5/7/2024: LME checks Russian aluminium play but is it game over? 5/7/2024: Piedmont Lithium wins US state mining permit after posting reclamation bond 5/6/2024: First Quantum hopes new Panamanian leader brings fresh look to disputed copper mine 5/6/2024: EU clears $14.9 bln purchase of U.S. Steel by Japan's Nippon |