September 26, 2022

Due to “negative metals demand momentum,” Goldman Sachs has set its 2023 average aluminum price to $2,563/mt, a 25% price drop from their prior estimate. However, this is still about $300/mt higher than the current average price for the 2023 LME aluminum futures forward curve. This could mean that Goldman believes the aluminum futures forward curve is undervalued for 2023. The bank fears that global stockpiles could build until Russia finds alternative buyers for excess inventory. However, aluminum prices could stabilize if or when Europe’s supply chain issues dissipate and Chinese demand returns.

Based on last Friday’s (9/23/2022) closing prices, the 2023 average price for LME Aluminum’s futures forward curve is approximately $2,220/mt. This is about $300/mt lower than Goldman Sachs’ 2023 price forecast. Aluminum end-users might utilize this opportunity by applying hedges that provide upside price protection, such as buying swaps or call options, both of which would establish a maximum price. Such positions are standard for end-user hedging; however, they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (9/26/2022)

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Important Disclosure: Indicative prices are provided for information purposes only, and do not represent a commitment from AEGIS Hedging Solutions LLC ("Aegis") to assist any client to transact at those prices, or at any price, in the future. Aegis makes no guarantee to the accuracy or completeness of such information. Aegis and/or its trading principals do not offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program. Certain information in this presentation may constitute forward-looking statements, which can be identified by the use of forward-looking terminology such as “edge,” “advantage,” “opportunity,” “believe” or other variations thereon or comparable terminology. Such statements are not guarantees of future performance or activities.