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14.05.2024

TRAFIGURA DUMPS OVER 400,000 TONS OF ALUMINUM INTO LME WAREHOUSES

The aluminum price remained bullish throughout April, rising 11.47% month over month. However, prices found a peak on April 22 when they failed to break above their 2023 high. They then retraced to the downside during the remainder of the month and into early May.
Amid the aluminum price retreat, Trafigura dumped over 400,000 metric tons of aluminum into LME warehouses. Most of the volumes reportedly originated from India, although the dump potentially contained some Russian material. While others informed Reuters that an additional 400,000 tons potentially await delivery, the first delivery saw LME stocks jump 88% to their highest level since January 2022.
LME continues to navigate the dynamic market following sanctions from the U.S. and UK that banned the trade of Russian aluminum. The immediate aftermath saw traders attempt to game the system by taking advantage of rent-sharing deals. Meanwhile, the sanctions saw Russian aluminum classified into two categories: material produced before April 13 and material produced after, which would be subject to sanctions.
Major traders, including Glencore and Trafigura, ordered material produced before April 13. To profit from rent-sharing with warehouses, they then redelivered it to warehouses as the less desirable category. Assuming the material would remain unwanted, traders aimed to profit from storage fees. The LME followed such moves with their own efforts to disincentivize such withdrawals.
According to Country of Origin data from the LME, April saw a sharp decline in Russian stocks from March, amounting to nearly 200,000 tons. This caused the proportion of Russian aluminum to decline from 91% in March to 88% in April. The loss of Russian aluminum saw inventory levels drop considerably until the most recent delivery forced a sharp rebound.
Assuming Trafigura’s delivery is mostly Indian material, the sharp increase in stocks could weigh on aluminum prices. While Inventory levels do not offer a meaningful correlation to prices, they nonetheless help color overall market sentiment.
Globally, aluminum remains an oversupplied market.

14.05.2024

BEARISH NICKEL PRICES SQUEEZE STEEL MILL EARNINGS

Nickel prices followed other base metals up throughout April, with a nearly 15% MoM rise. By late April, prices hit their highest level since September, although they subsequently began to retrace as upside momentum cooled.
Outokumpu and Acerinox, the parent company of North American Stainless, recently released their first-quarter results. While both producers noted constrained output in Europe due to strikes, demand appeared relatively stable in North America.
Acerinox stated, “The American market and the high-performance-alloys market remain stable, while that in Europe has not improved even with the reduction in supply.”
Meanwhile, Outokumpu saw stainless steel sales fall from the previous year. Nonetheless, the mill noted that “gradual recovery in Europe has continued” despite a 7% quarter-over-quarter drop in deliveries. In the Americas, Outokumpu saw deliveries rise by 15% despite weaker prices. Globally, the producer expects a 5-15% increase in deliveries from Q1 to Q2.
Despite the recent bump in nickel prices, the outlook remains sharply bearish. Indeed, LME inventories continue to build, while Indonesian output shows no signals of slowing. Meanwhile, EV sales in the U.S., a market once expected to help drive nickel demand, appear increasingly challenged: Q1 EV sales rose by a mere 3.3%, causing the sector to lose market share.
Analysts expect the nickel market to remain decidedly in surplus during the coming years, which could trigger mills like Outokumpu and North American Stainless to rethink their price structure.
Suppressed nickel prices due to Indonesia’s production boom, combined with a worsening outlook for demand drivers like EVs, make it risky for mills to continue using LME nickel prices to calculate their respective surcharges. This is especially true considering Indonesia plans to aim for an $18,000/mt price cap.

14.05.2024

US - ARCELORMITTAL PLANT TO BECOME THIRD US PRODUCER OF ELECTRICAL STEEL

ArcelorMittal and Nippon Steel’s flat-rolled steel plant in Calvert, Alabama, will become a new producer of electrical steel thanks to a federal credit of $280.5 million to help produce non-grain oriented steel (NOES).
The Alabama plant will become the third US electrical steel producer thanks to the investment credits.
The others are the Ohio-based Cleveland-Cliffs is the sole US-based producer of grain-oriented electrical steel (GOES), and US Steel makes NOES at the company’s Arkansas facility.
While GOES and NOES are both electrical steel grades, GOES is used to make goods such as transformers, while NOES goes into electric motors.
ArcelorMittal plans to deliver 150,000 tonnes per year of NOES, and construction of a new electric-arc furnace is under way, the company said.
A lack of GOES has been causing problems with sourcing electrical transformers, sources told.

14.05.2024

BASKET OPEC PRELIMINARY PRICE

OPECNA, the news agency of OPEC, announced the OPEC Basket preliminary price
13 may = $ 83.43 /b (down from previous daily value)
(The OPEC Reference Basket (ORB) introduced on 16 June 2005, is currently made up of the following: Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia , UAE and Venezuela.

14.05.2024

COPPER CONCENTRATE TC/RCs STRUCTURE AT RISK IN CURRENT MARKET

The influential annual treatment and refining charge (TC/RC) benchmark could be at risk, according to multiple market sources.
TC/RCs are discounts paid to smelters for turning copper concentrate into refined metal. Typically, the fees drop amid tight supply and increase in a well-supplied market.
Most miners and smelters tend to follow an annually agreed benchmark number for their long-term contracts, which is set during supply negotiations between major Chinese smelters and international miners in the last quarter of the year for the following year.
The negotiations often start around London Metal Exchange week in London in October and are finalized around CESCO week Asia, which takes place in November.
The most recent benchmark agreement was settled between Chilean miner Antofagasta and Chinese smelter Jinchuan at $80 per tonne in November 2023. This number was then followed by Freeport-McMoRan, which offered to supply Chinese smelters with copper concentrate at the same level.
But by the start of 2024, spot TCs were at $53.50 per tonne - some 33% lower than benchmark levels - and have continued to decline rapidly since. Spot TCs are now at $(2.60) per tonne.
The wide disparity between current spot levels and the benchmark has led to market participants calling into question whether the benchmark format will be followed for 2025.
The reason this disparity is leading to uncertainty over the benchmark structure is because miners perceive that they are losing out on some benefit of the low TCs due to having signed to the benchmark.
“If the market stays where it is, there is no space for the benchmark,” a trader source told . “Miners may as well stay on spot but smelters won’t sign at a loss.”
What are the alternatives?
Despite the challenges, many market participants pointed to the huge number of benefits of the benchmark system, with the majority expecting it to stay in place in some form.
“All the miners want a benchmark; people like to have the benchmark, Especially in Europe,” the miner source told.
“It isn’t just about TC level, it’s about logistics and the simplification of business."
Multiple sources suggested that a benchmark could be negotiated quarterly or for each half, rather than annually. This would reduce the extent to which terms can get out of line with spot levels.
Another miner noted that some companies would pursue private negotiations going forward to secure what they saw as fairer value for their concentrate.

14.05.2024

CHINA - GREEN ALUMINIUM AMBITIONS HIT BY ERRATIC RAINS AND POWER CUTS

Erratic rainfall in China's southwest is frustrating a multibillion-dollar push to green an aluminium industry that accounts for almost 60% of global output and, by some estimates, emits more carbon dioxide than Australia.
Lured by official promises of cheap hydropower, China Hongqiao Group (1378.HK), opens new tab and a handful of other coal-reliant smelters several years ago began moving 6.56 million metric tons of capacity - about 15% of China's total - from the northern belt to the mountainous and ethnically diverse Yunnan province.
The opportunity to cut electricity bills and help the world's top polluter tackle global warming seemed like a safe bet. But as Yunnan's rivers and reservoirs dwindled amid poor rainfall, which some experts attribute to climate change, so did the reliability of electricity.
The power cuts in the past two years have made it clear that Yunnan can't be sustained as a major producing region.
A 2022 World Economic Forum report anticipated, opens new tab that 2 to 3 million tons of primary aluminium production would move annually to China's southwest, mostly Yunnan, from 2020 to 2025, tapering to 90,000 to 100,000 tons per year by 2060.
The pace has been much slower and average rainfall so far this year is down 37%, according to the Wenshan government.
In its 2023 annual report, Shenhuo warned that further increases in electricity rates or supply disruptions would create uncertainty for its operations.