Base Metals Dashboard - Week Ending September 13, 2024

Aluminum

Alumina prices have spiked 50% this year, reaching their highest level since 2022 due to supply disruptions and rising demand from smelters, creating significant pressure on aluminum producers, particularly those without secure alumina sources. Trafigura emphasizes this as the most critical factor affecting aluminum markets, warning that prolonged high prices could lead to production cuts if imbalances persist, though they expect some relief later this year. Concord Resources offers a more cautious view, suggesting that the tight alumina market may endure longer than forecasted, especially if China, despite having spare capacity, doesn’t ramp up output. This supply uncertainty leaves aluminum smelters globally vulnerable to extended cost pressures. (Bloomberg)

China's expansion of its national carbon trading market to include the steel, aluminum, and cement industries by the end of 2024 will impose extra costs on producers for emitting carbon. This move is designed to push these high-polluting sectors to reduce emissions, with the added financial burden of carbon pricing as part of Beijing's strategy to curb industrial pollution. The extra costs will also help prepare Chinese industries for the European Union’s upcoming Carbon Border Adjustment Mechanism (CBAM), which will impose tariffs on carbon-intensive imports starting in 2026. (Bloomberg)

Copper

Copper extended its weekly gains as a weaker dollar boosted buying power, particularly for China, which saw an uptick in demand. Chinese fabricators ramped up production, with some running at full capacity through October 1, after purchasing copper at lower prices. Inventories in Shanghai and Guangdong saw significant drawdowns, reflecting improved demand, though concerns remain over the broader impact of China's property crisis. Policies such as the removal of tax rebates on copper scrap processing also shifted demand towards refined copper.(Bloomberg)
Chile’s copper commission, Cochilco, revised its 2024 copper price forecast to $4.18 per pound, down from $4.30, citing weaker demand driven by a slower-than-expected start to US rate cuts, geopolitical uncertainties, and rising inventories in Asia. Global copper demand is still expected to grow by 2.1%, outpacing production growth of 1.8%. Chile’s copper output is forecast to increase by 3% to 5.41 million tons in 2024, reaching around 5.7 million tons in 2025. Cochilco now expects the copper market to be fairly balanced, with a slight deficit this year and a surplus by 2025, shifting from previous forecasts of deficits for both years due to a sharper decline in demand than supply. (Bloomberg)

Other Important LME and CME Metals & Markets

Nippon Steel has revealed details of its talks with the United Steelworkers (USW) union amid ongoing opposition to its proposed acquisition of U.S. Steel. The company disclosed 32 engagements with USW leadership, including meetings, emails, and phone calls, to address what it called "public mischaracterizations" of the discussions. Despite these efforts, the USW has consistently condemned the deal, circulating press releases that claim no progress has been made. With the union’s influence in key states and political figures like Kamala Harris and Donald Trump opposing the takeover, the acquisition faces further hurdles as President Biden reportedly considers blocking the deal. (Benzinga)
Gold hit successive record highs, rising 1% to $2,583.45 an ounce, as traders anticipate a significant Federal Reserve rate cut next week. Bullion, which is up over 25% this year, continues to benefit from expectations of monetary easing, central bank buying, and heightened haven demand due to conflicts in the Middle East and Ukraine. Interest from retail investors has also picked up, contributing to the rally. Additionally, a softening U.S. economy and inflation concerns have made gold an attractive hedge, with increasing ETF holdings reflecting renewed interest. Gold is on track for a weekly gain of more than 3%. 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 $2,471/mt, up $129/mt on the week.

Aluminum prices were up 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¢/lb this week.

The CME Midwest Premium market is now in a contango from the September‘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 $9,308/mt, up $312/mt on the week.

Compared to last Friday, LME Copper's forward curve has shifted vertically higher 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 $15,944/mt, up $51/mt on the week.

As prices were up this week, nickel’s forward curve also modestly shifted higher. 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.