2019 ends with descending premiums and weak demand

2020 is drawing close, but there are no signals of an upswing for aluminium. After a sudden flare at the end of November, which had brought the price at the London Metal Exchange just below 1800 dollars per ton, profit taking, which was just as fast, caused it to plunge back to below 1750. Demand remains weak and stocks at the exchange went up to almost one million and three hundred thousand tons, with a leap forward of three hundred thousand tons in just three weeks. The consistency and the amount of deliveries were however not enough to reduce the backwardation between the December and January deadlines, which remains stubbornly fixed at around 150 dollars per ton. In such conditions, delivery at LME warehouses remains a very appealing prospect, with a consequent possibility of further increases in socks. These factors contribute to a vicious circle which sees premiums constantly decreasing (in Rotterdam, duty paid ingots were valued at the beginning of December at around 125 dollars per ton), in a physical metal market characterized by a weak demand and sellers anxious to empty their warehouses to cash in on the backwardation. In this context even Donald Trump’s intemperance, such as, his announcement of his intention to reinstate tariffs on imports of materials from Brazil and Argentina, fades into the background. Producers can only hope in a rapid conclusion of the trade agreement between the US and China, but with the US Presidential elections as a backdrop, any scenario is possible.