Aluminum On Thursday, aluminum producer Norsk Hydro stated they could cut production by another 30,000 mt/yr. However, they did not give a timeline for when these potential cuts could occur. This adds to the nearly 100,000 mt/yr of cuts they have already done this year. AEGIS notes that these potential curtailments add to a growing list of European smelter curtailments that have occurred this year. Excluding Norsk Hydro’s potential cuts, AEGIS estimates that approximately 1.16 million mt/yr, or 26% of Europe’s annual smelter capacity has gone offline since late 2021 due to falling demand or high electricity prices. Norsk Hydro made this prediction in its Capital Markets Day presentation, released Thursday. (Source: Norsk Hydro, Reuters) |
Zinc For more info on zinc, please check out our latest article, Could Peruvian Protests Affect Zinc Production or Prices? Due to “challenging market conditions,” Nyrstar’s Auby, France zinc smelter will remain closed “indefinitely” after completing scheduled maintenance, the company announced late last week. The smelter, which has a 172,000 mt annual capacity and is one of Europe’s largest, was closed in October to perform the scheduled maintenance. Previously, the smelter was shut down in January and February this year because of high electricity costs. However, production resumed in late March at a reduced level. Nyrstar is one of the world’s largest zinc producers, with 720,000 mt of annual zinc production in Europe, according to Reuters. Most of Nyrstar’s production is based in Europe, with smaller operations in Australia and the US. (Source: Reuters, Bloomberg) |
Zinc & Copper Mining The potentially bullish zinc news continues in South America. Despite nearby political protests, zinc and copper mines owned by Freeport McMoran, Southern Copper, BHP, Glencore, and Hochschild Mining are operating normally, according to Peru’s energy society SNMPE. Since then-President Pedro Castillo was impeached and arrested on corruption charges on December 7, deadly protests have blocked highways in Peru’s key agricultural areas, and “battles” have erupted in key urban centers including Lima, Apurimac, Arequipa, Ica, and Trujillo. These protests have fueled concerns that deliveries of semi-processed metal to ports could also be disrupted, according to Bloomberg. The Cerro Verde mine, which is owned by Freeport McMoran, is experiencing some logistical issues with people and supplies, but mining operations continue uninterrupted. Currently, the only known instance of mining disruptions is at the Las Bambas mine. However, the protests at Las Bambas predate the ones that just erupted. Moreover, operations continue at Las Bambas, but semi-processed copper cannot be shipped to the port due to a blockage at the main entrance. Peru is the world’s second-largest miner of both copper and zinc, according to USGS data. (Sources: Bloomberg, USGS) So why are Peru’s issues “potentially bullish” even though the new and ongoing protests have not impeded zinc or copper production? According to Bloomberg reports, nearly $1 billion of copper is “trapped” in storage at the Las Bambas mine due to road blockages. If protests persist or worsen, the production or transport of zinc or copper could be affected. Thus, given that zinc and copper prices are down for the year, this could be a good time for end-users of either metal to hedge future needs. This would allow such an end-user to be “ahead of the game,” should protests interrupt the production or transport of zinc or copper. Please contact AEGIS for specific strategies that fit your operations. Steel American steelmakers are increasing prices even further. On Tuesday, Cleveland-Cliffs announced they will increase prices for its flat-rolled products by $50/st. They have also set a minimum HRC price of $750/st. AEGIS notes that this minimum price is just below the current forward curve for CME HRC steel prices throughout 2023. This was the second price hike Cleveland Cliffs has implemented in the past three weeks, as they increased prices by $60/st on November 28. However, they did not set a minimum HRC price in the November 28 announcement. After Cleveland-Cliffs’s prior announcement, competitors Nucor, ArcelorMittal, Stelco, and US Steel all made similar price hikes in late November. (Source: Argus)
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LME Aluminum |
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LME Aluminum 3M settled at $2,375/mt, down $105.50/mt on the week. Aluminum prices were down this week. Compared to last Friday, the forward curve has shifted vertically lower by about $100/mt; however, its shape remains the same. It remains in contango, meaning that nearby prices are lower than forward prices. Aluminum consumers concerned about increasing prices might consider hedging future needs by buying swaps or call options. End-users might consider strategies that use only swaps or options or a combination of both, depending on risk tolerance. The aluminum market has sufficient liquidity to use swaps and options. Please contact AEGIS for specific strategies that fit your operations. |
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Prompt month CME MWP last settled at 20.0¢/lb this week. The CME Midwest Premium market is in contango throughout early 2023, flat between July and Dec ‘23, and then goes flat beyond Jan. ’24. The CME Midwest Premium swap market is thinly traded, and there is no options market. Hedging in this thinly traded market is challenging, so we recommend using strategically placed limit orders. Please contact 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 $8,266.50/mt, down $276.50/mt on the week. Compared to last Friday, LME Copper's forward curve has shifted lower by about $275/mt. The shape of the curve has changed in recent weeks. It is now in contango through June 2023 but becomes backwardated after that contract. 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 their risk tolerance. Please contact AEGIS for specific strategies that fit your operations.
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LME Nickel 3M settled at $28,273/mt, down $1,160/mt on the week. As prices were down this week, nickel’s forward curve has also shifted vertically lower, by about $1,100/mt. It remains in contango, meaning that spot prices are lower than futures prices. 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. |
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CME Hot Rolled Coil (HRC) Steel |
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Prompt month HRC Steel last settled at $675/T, up $8/T on the week. For CME HRC Steel, liquidity is low for swaps, but hedging can still be done with 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. |
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AEGIS Insights |
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12/14/2022: Could Peruvian Protests Affect Zinc Production or Prices? 12/14/2022: AEGIS Factor Matrices: Most important variables affecting metals prices 12/07/2022: Does the Copper Rally Have Legs? 12/01/2022: What's Been Driving Aluminum Prices Lately? 11/17/2022: Do Chinese Aluminum Import and Export Flows Affect LME Prices? |
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Notable News |
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12/15/2022: Panama tells First Quantum to halt flagship mine after talks fail; shares sink 12/15/2022: China Nov aluminium output rises as power controls ease 12/15/2022: Aluminium producer Norsk Hydro to raise capex, cut more costs 12/14/2022: Aluminium, copper sink on disquiet over China COVID cases 12/13/2022: US HRC: Prices flat, new increase announced 12/13/2022: Cliffs ups prices, targets HRC low at $750/st 12/13/2022: Peru copper mines face transport delays as protests spread 12/13/2022: Copper price rises as US inflation rate slows 12/12/2022: Analysis: Turbulence still haunts LME nickel, months on from trade debacle 12/9/2022: Exclusive: Canada aims to speed up new projects with critical minerals strategy 12/9/2022: WTO rules US steel, Al tariffs unwarranted |