Market Insights > Metals

Base Metals Dashboard - Week Ending April 22, 2022

April 22, 2022 | Chris Stadele

Bottom Line:

Copper prices this week were apparently unaffected by the deteriorating civil strife that has affected nearly 20% of Peru’s mine output. The Las Bambas mine, which produced 300,000 mt in 2021, halted production on Wednesday after protesters entered the site. Also on Wednesday, Peru’s prime minister declared a state of emergency near the 170,000 mt/year Cuajone mine that closed in February when protestors stopped the mine’s water supply. This state of emergency aims to end the protests by terminating the protestors’ civil liberties, according to Reuters. Friday morning, Reuters reported Peru’s government said its army had ended the Cuajone mine protest. No word has been given on when operations will restart. In both instances, the protestors were demanding compensation for mine usage. At 2.2 million mt, Peru was the world’s second largest copper miner in 2021, according to USGS data.

Notable Metals News

COVID lockdowns have temporarily forced Yunnan Tin to stop production at its Yunnan Hualian Zinc & Indium Stock Co. mining unit. Yunnan Tin produced 35,000 mt of tin ore in 2021, accounting for nearly 38.5% of Chinese and approximately 11.7% of world production, according to S&P Global and USGS data. The company has said the shutdown, which was announced earlier this week, would be temporary. Yunnan’s website did not clearly outline recent mine production for the Yunnan Hualian unit.

Also in China related news, the country rarely exports alumina; however, they exported 9,949 mt of alumina to Russia last month, up from 104.5 mt in March 2021, according to China customs data and Reuters. Exports are small compared to China’s total production; it exported 12,955 mt of alumina in March but produced over six million mt that month according to Reuters. Late last month, Bloomberg, citing anonymous traders, reported that China was testing “whether the cargoes face any logistics issues or problems with sanctions, with more ready to ship if all goes well.” Russia’s aluminum producer, Rusal, is currently having problems with sourcing alumina due to logistical issues from the Ukrainian conflict and Western sanctions.

LME Aluminum

LME Aluminum 3M settled at $3,245.50/mt, down $40/mt on the week.

The forward curve for LME Aluminum is currently quite backwardated, meaning that spot prices are higher than futures prices. A backwardated forward curve favors the consumer hedger. The aluminum market has sufficient liquidity to use swaps and options. Consumers might consider strategies that use only swaps or options or a combination of both, depending upon your risk tolerance. Please contact AEGIS for specific strategies that fit your operations.

Midwest Premium

Prompt month CME MWP last settled at 39.926¢/lb this week.

The CME Midwest Premium swap market is thinly traded, and there is no options market. Hedging in this market is tricky, so we recommend using strategically placed limit orders. Please contact AEGIS for specific strategies that fit your operations.

LME Copper

LME Copper 3M settled at $10,110/mt, down $205/mt on the week.

The forward curve for LME Copper is currently quite backwardated, meaning that spot prices are higher than futures prices. A backwardated forward curve favors the consumer hedger. The copper market has sufficient liquidity to use swaps and options. Consumers might consider strategies that use only swaps or options or a combination of both, depending upon your risk tolerance. Please contact AEGIS for specific strategies that fit your operations.

LME Nickel

LME Nickel 3M settled at $33,107/mt, down $68/mt on the week.

Like LME copper and aluminum, the forward curve for LME Nickel is currently backwardated, meaning that spot prices are higher than futures prices. A backwardated forward curve favors the consumer hedger. The nickel market has sufficient liquidity to use swaps and options. Consumers might consider strategies that use only swaps or options or a combination of both, depending upon your risk tolerance. Please contact AEGIS for specific strategies that fit your operations.

CME Hot Rolled Coil (HRC) Steel

Prompt month HRC Steel last traded at $1,465/T, down $14/T on the week.

For CME HRC Steel, liquidity is low for swaps, but hedging can still be done with strategically placed limit orders. The same is true for options. Similar to other metals, a combination of both swaps and options might work in certain cases, depending upon your risk tolerance. Please contact AEGIS for specific strategies that fit your operations.