Market Insights > Metals

Base Metals Dashboard - Week Ending June 14, 2024

June 14, 2024

Aluminum

Aluminum spreads are suggesting that spot demand has collapsed in recent weeks. Currently, the LME Cash contract is trading at a $45/mt discount to the benchmark 3M contract. This is nearly $70/mt lower than about six weeks ago, when the cash contract was trading at an approximate $27/mt premium to the 3M contract. This suggests that spot demand has slumped significantly while prices were increasing. (Source: LME)

High prices may hinder Chinese demand in June. Prices in China have reached a two-year high which could hinder aluminium restocking and demand. Demand for aluminium in construction has already dropped accoridng to recent data. (Source: Bloomberg)
The global aluminum surplus is expected to narrow through 2025, potentially leading to higher prices. This is expected to be driven by a rapid increase in Chinese consumption. (Source: Bloomberg)
In early May, there was a significant increase in aluminum stocks at London Metal Exchange (LME) warehouses, marked by the largest daily inflow ever recorded. This surge was driven by deliveries into Malaysian warehouses by major metals traders, including Trafigura. By the end of May, total aluminum inventories had soared by 128% compared to last month. (Source: Bloomberg)

Copper

Chinese copper demand is showing signs of improvement. Inventories in eight major Chinese regions have fallen, extending a decline in stocks that started in 2019. In the spot market, Chinese buyers are now paying a premium for cargoes. (Source: Bloomberg)
Contango may increase in copper futures. The curve is relatively flat with a contango of about 0.4%, but this may not reflect higher stockpiles and a well-supplied market. Asian copper inventories are at the highest level in two years. (Source: Bloomberg)
Copper prices hit a seven-week low as Chinese fabricators showed muted demand despite a recent price pullback. Chinese manufacturers consider current copper prices too high, resulting in limited purchases. This sentiment is reflected in rising inventories on both the Shanghai Futures Exchange and the London Metal Exchange, with copper inventories reaching their highest levels in years. (Source: Bloomberg)

LME Aluminum

LME Aluminum 3M settled at $2,462.73/mt, down $46.77/mt on the week.

Aluminum prices were down this week. Compared to last week, the futures forward curve remains in a steep 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 20¢/lb this week.

The CME Midwest Premium market is now in a contango from the June ‘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 $9,741.50/mt, down $53/mt on the week.

Compared to last Friday, LME Copper's forward curve has shifted slightly lower by approximately $53/mt 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 $17,575/mt, down $525/mt on the week.

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

CME Hot Rolled Coil (HRC) Steel

Prompt month HRC Steel last traded/settled at $735/T, down $0/T on the week.

Steel mill profit margins improved dramatically throughout 3Q and 4Q2023 and are also starting 2024 on a good note. The CME HRC Steel – CME MW Busheling Fe Scrap spread, which is generally used as a gauge for steel mill profitability, is now approximately $318/st, down from about $320/st on September 1. This is mainly due to decreasing scrap prices. Thus, steel mills should consider hedging production and raw material usage for 2024. For most steel producers, this would consist of buying CME MW Busheling Scrap swaps and selling CME HRC swaps. Options are available for CME HRC, but they are relatively illiquid. Please get in touch with AEGIS for specific strategies that fit your operations.