Base Metals Dashboard - Week Ending October 11, 2024

Aluminum

Aluminum prices surged over 2% in London following the suspension of bauxite exports from Guinea by Emirates Global Aluminium. The company is seeking clarity from local customs authorities about the halt, which impacts the supply of bauxite, a vital raw material for alumina production. Despite the export disruptions, Emirates Global stated that its alumina refinery in Abu Dhabi remains operational. In response to the supply constraints, alumina futures in Shanghai have reached their highest levels since their launch in June 2023.

The recent export stoppage compounds ongoing supply issues in the alumina market, following earlier curtailments by Alcoa and Rio Tinto. In contrast, Chinese producers are ramping up output to take advantage of favorable market conditions, with approximately 6.4 million tons of new capacity set to come online next year. This increase could potentially exert downward pressure on prices, even as smelters struggle with rising alumina costs. (Bloomberg)

CME Group blocked Istim Metals' application for an aluminum warehouse registration due to objections from metal market participants, following a controversial fee increase by Istim at its London Metal Exchange (LME)-registered depots. Istim, which dominates LME metals storage, applied in July to list a warehouse in Gwangyang, South Korea, for CME’s Comex aluminum contract. The rejection, announced on October 4, was heavily influenced by traders’ concerns over the fee hike, which has contributed to ongoing disruptions in the LME’s aluminum market. Traders have faced difficulties withdrawing metal from Istim’s warehouses, further complicated by elevated re-registration fees, which remain above the industry norm despite partial reductions. (Bloomberg)
The global aluminum market is forecast to shift into deficit by 2025, with output growth slowing to 1.8% compared to a 3.3% rise in demand. China's production is expected to increase by just 1.3% as it nears its 45 million-ton government imposed capacity cap, while the rest of the world is projected to see a 2.4% rise in output, driven by potential restarts in Europe and Brazil and new facilities in Indonesia and India. Key developments include Shandong Nanshan Aluminum's 250,000-ton smelter in Indonesia and Huaqing Aluminum's 2 million-ton project in Sulawesi. (Bloomberg)

Copper

Copper steadied near a two-week low as investors await a critical policy briefing from China’s Finance Minister, Lan Fo’an, scheduled for Saturday. The market is looking for signs of additional capital spending commitments that could bolster demand for industrial metals, following a series of underwhelming economic measures. Despite the recent dip in copper prices, analysts note that stability in China’s real estate sector and stronger equity markets could eventually lead to improved consumer sentiment and support for commodities. Copper traded at $9,695/ton on the LME, while aluminum and zinc posted modest gains. (Bloomberg)

Other Important LME and CME Metals & Markets

Nippon Steel has agreed to sell its 50% stake in the AM/NS Calvert mill in Alabama to joint venture partner ArcelorMittal for $1, should its $14.1 billion bid for US Steel succeed. This move is intended to alleviate potential antitrust issues arising from Nippon’s increased footprint in the US steel market post-acquisition, as both companies produce auto steel sheets. The transaction, contingent on regulatory approval for the US Steel deal, would also see Nippon injecting cash and forgiving loans totaling $900 million. The deal faces opposition from President Biden, and a US security panel’s review has been delayed until after the November presidential election, pushing a final decision further into the future. (Bloomberg)
Gold erased its weekly decline as traders weighed mixed US economic data and speculated on the Federal Reserve's next moves regarding interest rate cuts. A flat producer price index for September and a surprising drop in consumer sentiment fueled uncertainty about the Fed's need for further rate cuts, with traders pricing in 20% odds the Fed will hold steady in November or December. Despite inflation concerns, Fed officials remain confident about continuing to ease rates. The precious metal, up over 25% this year, also gained support from central bank purchases and heightened geopolitical tensions in the Middle East. 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 $2,632/mt, down $20.50/mt on the week.

Aluminum prices were down this 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 October‘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 $9,791.5/mt, down $152/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 $17,864/mt, down $128/mt on the week.

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