Base Metals Dashboard - Week Ending August 2, 2024

Aluminum

The recent decline in LME aluminum prices can be attributed to weak demand and ample supply. In Yunnan, a key production region in China, increased rainfall improved hydropower availability, allowing smelters to resume operations. This led to a significant increase in primary aluminum output, rising by 6.2% annually in June to 3.76 million tonnes, the highest level since November 2014. The abundant supply and subdued demand have collectively pressured aluminum prices downward. (Alcircle)

Rio Tinto's first-half profit rose by 1.8% to $5.8 billion despite missing estimates, as the company remained resilient amid China's economic slowdown. Despite lower iron ore and aluminum prices, stronger copper prices helped offset the impact. CEO Jakob Stausholm emphasized stable demand from China, maintaining full-year production guidance. The company is at a growth "inflection point," with increased cash flow from the Oyu Tolgoi copper mine ramp-up and ongoing investments in the Simandou project and Rincon lithium project. Rio's shares gained 1.2% following the earnings announcement, reflecting a positive long-term outlook despite immediate challenges. (Source: Bloomberg)

Copper

Copper prices held steady on the London Metal Exchange despite fluctuations earlier in the week, driven by weak US jobs data and a falling dollar. The lackluster employment report raised concerns that the Federal Reserve might need to accelerate rate cuts, potentially as soon as September, to support the economy. While this could lower borrowing costs for manufacturers, the economic slowdown might reduce demand for industrial metals. Traders are also keeping an eye on possible fiscal stimulus from China, which faces its own economic challenges. (Source: Bloomberg)

Money managers have closed out over $20 billion in bullish copper bets since mid-May, driven by mounting worries about Chinese demand. Copper prices, which spiked to a record above $11,100 a ton in May, have since slumped by more than 20%. Despite the retreat, bullish positions remain elevated by historical standards. The key question now is whether the exit rush is over, with some investors expecting a looming supply crunch to sustain their positions. While demand is weak and the market is in surplus, expected smelter output cuts could stabilize prices. (Source: Bloomberg)

Other Important LME and CME Metals & Markets

ArcelorMittal reported a decline in second-quarter profits, attributing it to unsustainable market conditions caused by a surge in cheap Chinese steel exports. The steelmaker, facing weak demand and falling prices in the US and Europe, cut its forecast for steel consumption outside China to 2.5%-3%, down from 4%. Despite this, ArcelorMittal's earnings of $1.86 billion still exceeded estimates. The company highlighted China's excessive production and aggressive export strategy, which are driving steel prices below marginal costs and prompting new trade barriers in the US and EU.(Source: Bloomberg)
Gold prices declined as equity markets sold off, driven by concerns that the Federal Reserve has been too slow to cut interest rates. Although gold typically benefits as a safe-haven asset during market turmoil, the sharp selloff in stocks led traders to liquidate gold holdings to cover losses. Gold had briefly risen earlier due to speculation that the Fed might lower rates in September following weak US jobs data, but this optimism was overshadowed by broader market declines. Despite a strong performance this year, gold's momentum was hindered by the market's focus on rate cuts and broader economic concerns. 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 $2,263/mt, down $25.5/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 19.5¢/lb this week.

The CME Midwest Premium market is now in a contango from the July‘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 $9,055.5/mt, down $55.5/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 $16,273/mt, up $479/mt on the week.

As prices were up this week, nickel’s forward curve also shifted higher. 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.