Base Metals Dashboard - Week Ending August 23, 2024

Aluminum

Hindalco Industries plans to invest $10 billion in aluminum and copper projects across India and the U.S. This investment aims to capitalize on India's construction boom and growing demand for electric vehicles. Key projects include a new 850,000-tonne alumina refinery and a 200,000-tonne expansion at the Aditya Aluminum smelter in Odisha, alongside copper smelting capacity expansion in Gujarat. In the U.S., Hindalco's unit, Novelis, is investing in a 600,000-tonne rolling and recycling plant in Alabama. Chairperson Birla highlighted the strategic importance of the company’s new aluminum battery foil plant, which positions Hindalco to benefit from the EV market. (Forbes)

Copper

Lundin Mining Corp. has resumed negotiations with union leaders at the Caserones copper mine in Chile to resolve a strike that has disrupted production for the past 12 days. The strike, which began on August 12 and involves about 300 workers, has impacted operations at the mine, which produced 137,100 tons of copper last year. This strike comes amid a global tightness in copper concentrate supply, although the market for refined copper remains well-stocked. The talks follow a similar situation at BHP’s Escondida mine, where a strike was ended after workers received a significant signing bonus. A resolution at Caserones could restore normal production levels at the mine, where Lundin holds a 51% stake. (Source: Bloomberg)
The US has seen a dramatic influx of copper imports, driven by a spike in Comex prices and a significant arbitrage opportunity that led to unusual shipments from China. This surge reflects a broader market dislocation, with Chinese copper exports hitting record levels due to weakened domestic demand. As a result, US imports soared to around 91,000 tons in July, with expectations that volumes could continue rising, potentially reaching the highest levels in a decade. However, questions remain about the sustainability of this trend and its impact on Comex prices as more metal arrives. (Source: Bloomberg)

Other Important LME and CME Metals & Markets

China has suspended its approval system for new steel plants, responding to a severe demand slump that has devastated industry profits and led to a surge in exports. The suspension halts the long-standing capacity swap system, where new plants could only be built if old ones were closed. Citigroup analysts believe this move will not sufficiently address overcapacity issues, urging more aggressive measures. The decision follows warnings from China Baowu Steel Group Corp. about the industry facing conditions worse than the 2008 and 2015 crises. Despite the announcement, the market reaction was muted, as many new plants have already been approved and could still enter the market. (Source: Bloomberg)
Iron ore prices are expected to continue their decline into the $80s-a-ton range as China’s steelmakers cut production, according to Citigroup Inc., which lowered its three-month price forecast to $85 from $95 a ton. Citi analysts, including Shreyas Madabushi, noted that the market dynamics have changed, making previous dip-buying opportunities less attractive. The ongoing crisis in China’s steel industry, driven by slumping demand and weak product prices, has combined with rising exports from leading miners to create a market surplus. Citi emphasized that "further price weakness is required" to rebalance the market as China transitions to an economy requiring less steel. (Source: Bloomberg)
Gold prices remain above $2,500 an ounce after Federal Reserve Chair Jerome Powell indicated that interest rate cuts are imminent. Powell’s remarks at the Fed’s annual Jackson Hole conference affirmed expectations for a reduction in borrowing costs starting in September. The anticipation of lower rates has driven gold to near-record highs, as traders expect further gains if the Fed follows through on its dovish signals. The metal’s strength, despite recent high borrowing costs, is supported by strong central bank purchases, Chinese demand, and geopolitical uncertainties. 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 $2,542/mt, up $176.5/mt on the week.

Aluminum prices were up this 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 18.9¢/lb this week.

The CME Midwest Premium market is now in a contango from the August ‘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 $9,288.5/mt, up $173/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 $16,758/mt, up $385/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.