Base Metals Dashboard - Week Ending July 19, 2024

Aluminum

Aluminum prices continued to trade lower this week amidst a cautious macroeconomic environment and subdued demand. Concerns were fueled by expectations of a US Federal Reserve interest rate cut, which initially buoyed market sentiment. Domestically, China's monetary policy adjustments aimed to stabilize liquidity, yet market optimism remained tepid pending outcomes from the ongoing Third Plenary Session. On the supply side, China saw increased operational capacity, particularly in Yunnan, contributing to historically high levels of aluminum output. Despite stable production costs, weak downstream demand persisted, notably in construction materials, restraining market recovery. International dynamics, including trade tensions and geopolitical conflicts, further dampened prospects, prompting a bearish outlook on aluminum prices for the near term. (Source: SMM)

Metal Miner's Aluminum Monthly Metals Index (MMI) fell by 4.67% from June to July, with prices bottoming in mid-June, reflecting a 6.86% drop. The U.S. imposed a 10% tariff on certain Mexican aluminum imports to curb Chinese dumping, but the impact on U.S. prices is expected to be minimal due to Mexico's small share of imports. These tariffs aim to prevent a potential surge in imports, though Chinese investments in Mexican manufacturing continue to rise. Despite tariffs, China’s high production levels and overcapacity remain a significant deflationary threat to global aluminum prices. (Source: Metal Miner)

Copper

Copper prices suffered their steepest weekly decline since 2022 as a result of a disappointing policy meeting in China, which failed to introduce significant stimulus measures to support metals demand. Futures plummeted approximately 5% in London this week amidst a broader market downturn that also affected aluminum, tin, and nickel. The retreat was exacerbated by a stronger US dollar and investor aversion to risk assets. Concerns about subdued demand in China, coupled with mounting global copper inventories and reports of a significant earthquake in Chile's mining region, compounded market uncertainty. (Source: Bloomberg)

A 7.4 magnitude earthquake struck Chile’s northern mining region near major copper and lithium mines, causing power disruptions, rock slides, and one fatality. The quake, occurring at a depth of 117.4 km, did not immediately affect mining operations, including those at the world’s largest copper mine, Escondida, and Chile’s state-owned Codelco facilities. While safety protocols were activated, initial assessments indicated no significant operational disruptions at these crucial mining sites. Chile, a leading global supplier of copper and lithium, continues to monitor the situation closely amidst ongoing checks and evaluations.

Other Important LME and CME Metals & Markets

Despite uncertainty about steel demand, Chinese steelmakers are restocking, driven by price fluctuations rather than economic indicators. From January to June 2024, iron ore imports increased by 6.8% year-on-year, reaching 611.2 million tons, which is attributed to steelmakers rebuilding stocks. Port ore stocks in China rose to a two-year high of 150.2 million tons by mid-July. Iron ore prices declined in the first quarter and stabilized in the second quarter, influencing this restocking trend. Despite increased ore imports, steel production in China fell by 1.1% year-on-year in the first half of 2024, reflecting reduced demand and margins. (Source: GMK Center)
Gold prices experienced a third consecutive day of decline, signaling the potential end to a record-breaking rally earlier in the week. After reaching an all-time high of $2,483.73/oz, bullion dropped by as much as 2.1% on Friday amidst speculation that the rapid ascent may have been excessive. Traders initially drove prices up on expectations of aggressive monetary easing from the Federal Reserve and geopolitical uncertainties prompting safe-haven buying. Analysts from Standard Chartered cautioned that a seasonal dip in physical demand coupled with uncertain investor interest could soften gold's support levels in the near term. Despite this, ETFs continued to see inflows, marking their sixth consecutive day of accumulation. As of midday Friday, spot gold was down 1.8% to $2,402.36/oz, heading towards its first weekly loss in four weeks amid a strengthening Bloomberg Dollar Index. If you have exposure to the gold market and are concerned about increasing prices, please reach out to AEGIS for strategies.

LME Aluminum

LME Aluminum 3M settled at $2,351.50/mt, down $129.5/mt on the week.

Aluminum prices were down this week. Compared to last week, the futures forward curve remains in a 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.

Midwest Premium

Prompt month CME MWP last traded/settled at 18.8¢/lb this week.

The CME Midwest Premium market is now in a contango from the June ‘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. *

LME Copper

LME Copper 3M settled at $9,310/mt, down $567/mt on the week.

Compared to last Friday, LME Copper's forward curve has shifted vertically lower and is in contango throughout 2024 and early 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.

LME Nickel

LME Nickel 3M settled at $16,256/mt, down $600/mt on the week.

As prices were down this week, nickel’s forward curve also shifted lower. 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.