The LME aluminum 3-month price was moving further down on the morning of Jan. 5 and was last seen trading at $2,287 per metric ton (mt) as of this article’s writing, already down 6% from its recent peak. SHFE cash also concluded the first week of the year on a weaker foot. The cash contract settled at RMB19,265/mt and last traded at RMB19,280/mt.
Fed minutes show uncertainty, non-farm payrolls straight ahead
Global equity markets have been under renewed selling pressure since Wednesday after minutes from the Fed’s December meeting showed policymakers had a high level of uncertainty around their interest-rate projections and did not rule out further rate hikes. Indeed, the minutes from the Dec. 12-13 meeting showed a cautious Fed, even though almost all of the top officials had penciled in some easing in their 2024 forecasts. In general, officials stressed the need to move carefully.
The latest non-farm payrolls for December were set to be released the afternoon of Jan. 5. The US is expected to have created an additional 170,000 new jobs in December, according to the consensus forecast, below the 199,000 reported for November. The Fed is closely watching employment indicators as policymakers wait for signs of a cooling labor market before cutting interest rates.
US Midwest premium increases slightly to start the year
The US Midwest premium now sits between $0.188–0.194 per pound as 2024 kicks off. The bump higher can be attributed to the slight contango that had built for January 2024 throughout Q4. Overall, fundamentals remain the same, and the new year is expected to bring a crawl back to steady growth as opposed to a sprint higher. This should limit the upside risks to the premium and extend this period of low volatility.
Macroeconomic and geopolitical disturbances continue to be part of normal conversations, as recent disturbances in the Red Sea are on everyone’s mind. The attacks on shipping vessels have forced them to take a longer route, which takes more time and resources. Oil prices are starting to rise, and the price of insurance is also increasing. With shipping costs being one of the largest inputs into the premium, these increases will raise the replacement cost of metal coming into the US even if no shipments are directly affected. As of now, the fallout has been minimal but there is potential for premiums to jump higher as a result.
US new orders: All products show improvement in November except cans and foil
According to the latest Index of Net New Orders of Aluminum Mill Products released by the US Aluminum Association (AA), total orders in November 2023 were up 0.2% compared to November 2022. This is better than the 1.5% year-over-year (YoY) decline reported in October. It is worth noting that new orders for October were revised higher in this latest report, with October orders now showing a decline of 1.5% versus a decline of 3.4% YoY previously. The sectors that were upgraded are new orders of non-heat-treatable sheet (-10.8% YoY) and foil (+13.6%).
Back to the November report, there were improvements in most of the sectors. New orders of non-heat-treatable sheet, which include the 1xxx, 3xxx, and 5xxx series alloys, improved from -10.8% YoY in October to -0.4% YoY in November. New orders of heat-treatable sheet, which contain the 2xxx, 6xxx, and 7xxx series alloys – popular in automotive and aerospace applications – moved back to 3.9% YoY growth from a decline of -2.1% YoY in the previous month. There was also a noticeable improvement in new orders for plate, from a decline of -6.6% YoY in October to growth of 25% YoY in November.
Another key sector that continued to improve in November was extruded products. New orders of extruded shapes were up 9.2% YoY in November, better than the 4.4% growth reported in October. The only products that showed a worse performance versus October were domestic can stocks, down 1.5% YoY in November from 3.2% growth previously, and foil, down almost 40% YoY versus growth of 13.6% in October.
Rusal announces new sales contract with En+ related company
According to a notice posted on the Hong Kong Exchange website, Rusal has announced a new sales contract between one of its units, JSC, and an associate company of En+ called KraMZ Ltd. The contract runs until Dec. 31, 2024, and involves a volume of 101,400 mt, representing a total value of $247.5 million.
JSC is principally engaged in the production and sale of aluminum, including alloys, value-added products, and alumina, while KraMZ Ltd is principally engaged in aluminum processing. En+ is an international vertically integrated aluminum and hydropower producer. Details of the filing can be found here.
Tariff suspensions on EU steel and aluminum are extended, signaling ongoing trade talks
President Joe Biden has extended the suspension of tariffs on EU steel and aluminum for an additional two years, lasting until Dec. 31, 2025. The move is intended to facilitate ongoing negotiations on issues like overcapacity and eco-friendly production. Initially imposed by former President Donald Trump, these tariffs have been replaced by a tariff rate quota (TRQ) system, allowing specified quantities of EU steel and aluminum into the US without tariffs. The decision also affects the EU’s retaliatory tariffs on various US products, suspending them until 2025. This extension is seen as a significant development in US-EU trade relations, particularly with upcoming elections in both regions.
This article was first published by CRU. Learn more about CRU’s services at www.crugroup.com/analysis.
Marziyeh HorehRead more from Marziyeh Horeh
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