Base Metals Dashboard - Week Ending July 26, 2024

Aluminum

Aluminum prices have risen from a four-month low, partly due to expectations that China's new emissions reduction plan for metal smelters may lead to capacity cuts. This plan, which includes support for renewable energy use and restrictions on new coal-fired generators, is seen as a potential driver for future price increases. Despite this, analysts express skepticism about the plan’s effectiveness in addressing current weak demand, particularly in light of recent economic pessimism in China and a significant drop in Chinese stock markets. (Source: Bloomberg)

Emirates Global Aluminium (EGA), the world's largest premium aluminium producer, has become the first company to digitally link its metals quality analysis system to the London Metal Exchange (LME). This innovation enables the automated submission of analysis certificates required for metal shipments into and out of LME-approved warehouses, enhancing traceability, accessibility, and transparency. EGA's CEO, Abdulnasser Bin Kalban, highlighted this digital transformation as a core part of EGA's strategy to innovate aluminium production. The LME's Head of Physical Markets, Georgina Hallett, praised this move for its potential to replace paper certificates with secure, efficient digital solutions. (Source: Bloomberg, Alcircle)

Copper

Copper prices have steadied above $9,000/mt, following a nearly 20% drop from May’s record highs, driven by global stock market selloffs and concerns about weak demand, particularly from China. Despite this, analysts are cautiously optimistic, suggesting that demand might recover in the second half of the year as lower prices could attract buyers and inventory levels are adjusted. Recent unexpected rate cuts by China’s central bank and tightening supplies of copper concentrate and scrap could support a potential rebound. (Source: Bloomberg)

Codelco, the world's leading copper supplier, reported an 8.4% drop in first-half copper production due to operational setbacks and project delays at its Chilean mines. This decline highlights the company's struggle with the effects of long-term underinvestment, which has jeopardized its position as the top global copper producer. Analysts suggest that BHP Group might surpass Codelco in production this year.

Other Important LME and CME Metals & Markets

Iron ore prices surged by up to 3.6% in Singapore, recovering from a recent low, as investors anticipated that China's new policy stimulus measures would increase demand for the steelmaking commodity. The rebound comes after Beijing's announcement of $41 billion in special debt issuance for industrial upgrades and a rate cut on policy loans, aimed at boosting economic growth. Despite this positive sentiment, iron ore futures remain down 2.3% for the week, and further price movements may depend on upcoming Politburo meetings and additional policy announcements. (Source: Bloomberg)
Gold is set to decline for a second consecutive week as recent U.S. inflation data dampens expectations of an imminent Federal Reserve interest rate cut. The data, which showed mild inflation and strong consumer spending, suggests that the Fed may not need to ease rates soon. Although the market anticipated a September rate cut, ongoing solid U.S. economic performance and modest disinflation reduce the likelihood of an early reduction. Despite gold's recent record highs and a 16% increase this year, driven by central bank demand and geopolitical tensions, the current outlook for Fed policy is weighing on prices. 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 $2,289/mt, down $62/mt on the week.

Aluminum prices were down this week. Compared to last 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 18.8¢/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 $9,111/mt, down $199/mt on the week.

Compared to last Friday, LME Copper's forward curve has shifted vertically lower 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 $15,794/mt, down $462/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.