Market Insights > Metals

Base Metals Dashboard - Week Ending June 9, 2023

June 09, 2023 | Chris Stadele

Aluminum

The current Section 232 tariffs on aluminum imports into the US will likely remain in place, according to comments at a recent aluminum industry conference. This is likely a non-issue, however, as approximately 80% of US aluminum imports come from Section 232-exempt countries.

As for Russia, aluminum industry participants feel that Russian aluminum will likely remain unsanctioned by the US. The Biden administration’s current 200% tariff on imports of Russian aluminum is effectively a sanction, as it makes those purchases uneconomical. This tariff has not meaningfully impacted global aluminum flows, as even before the Russia-Ukraine conflict, the US imported little from Russia. Any flows that could have landed in the US have already found new buyers (namely China).

Contrary to the US, however, EU sanctions against Russian aluminum are still possible, according to the European Aluminum Association. Approximately 10% of the region’s aluminum imports come from Russia, the association also stated. These comments were also made at the Harbor Aluminum Summit in Chicago earlier this week. (Source: Bloomberg)

Rusal, which is Russia’s top aluminum producer, will need to import approximately 28% of its alumina needs this year, or 2.35 million mt, according to Bloomberg estimates. This shortfall is largely due to the Ukraine-based Nikolaev plant being closed because of the Russia-Ukraine war and Australia’s export ban on alumina to Russia. Nearly all of China’s recent alumina exports are going to Russia, thereby helping to fill the supply gap. (Source: Bloomberg)

Government authorities in China’s Yunnan province might grant 2 million Kw of power to the region’s aluminum smelters to restart production, according to Shanghai Metal Market. Smelters in Yunnan province, which is China’s top aluminum production, have experienced government-forced shutdowns in recent months due to drought-induced power rationing. (Source: Shanghai Metal Market)

Copper

LME copper finished higher this week after Chinese authorities announced a new round of economic stimulus measures. According to CNBC, six of China’s largest state-owned banks have lowered interest rates on depositor saving accounts. This move is meant to spur consumption. (Source: CNBC)

China’s copper imports last month were a mixed bag. At 2.55 million mt, imports of copper ore & concentrate surged to an all-time high. Imports of unwrought copper & copper products were 444,000 mt, the highest since January but down compared to May 2022. (Source: China Customs)

Recent estimates from Wood Mackenzie suggest that the Congo could soon be the world’s second-largest copper producer. Peru has consistently been the No. 2 producer behind neighboring Chile, but political and production issues have led to stagnant output in recent years. Meanwhile, the Congo has seen greater development and investment due to increased demand for cobalt and copper. According to Peru's Mining Minister, Oscar Vera, the country is fighting back, with nearly $6 billion of new mines coming online in the next two years. (Source: Reuters)

Steel

According to Goldman Sachs, the global steel market will face headwinds in 2H023. Chinese steel demand has stumbled this year due to a slumping real estate sector. Chinese steelmakers have been able to increase exports as real estate slumped, but weakening global steel demand could crimp exports, they also stated. (Source: Bloomberg)

Continuing on China, the country’s steel exports last month hit the highest level since 2016, according to customs data. Chinese steelmakers have ramped up exports in recent months as domestic demand has fallen. (Source: China Customs, Bloomberg)

Due to economic uncertainty and higher interest rates, American consumers are pulling back on car purchases, according to Argus. Sales of light trucks and cars fell to a seasonally adjusted annual rate of 15.05 million vehicles in May, down from a rate of 16.09 million/yr in April, according to data from the Bureau of Economic Analysis. If auto manufacturers forecast a pullback in vehicle demand in the near to medium term, they could hold down production. This in turn would suppress overall steel demand. (Source: Argus)

LME Aluminum

LME Aluminum 3M settled at $2,268/mt, up $4.5/mt on the week.

Aluminum prices were up this week. This has caused the forward curve to shift vertically higher by approximately $5/mt. It remains in a steep contango, meaning that nearby prices are lower than forward prices. Aluminum consumers that are 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 contact AEGIS for specific strategies that fit your operations.

Midwest Premium

Prompt month CME MWP last settled at 24.6¢/lb this week.

The CME Midwest Premium market is now quite flat for the August '23 through December ’23 contracts. 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 limit orders. Please contact AEGIS for specific strategies that fit your operations.

* Please note all these charts are for desktop only. *

LME Copper

LME Copper 3M settled at $8,371.5/mt, up $134.5/mt on the week.

Compared to last Friday, LME Copper's forward curve has risen vertically by approximately $140/mt and remains in contango. 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.

LME Nickel

LME Nickel 3M settled at $21,170/mt, down $41/mt on the week.

As prices were down this week, nickel’s forward curve has also shifted vertically lower, by about $40/mt. It is in a steep contango, meaning that nearby 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.

CME Hot Rolled Coil (HRC) Steel

Prompt month HRC Steel last settled at $927/T, down $13/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.