Andy Farida, base metals analyst at Fastmarkets, gives his views on what the US election year means for the aluminium midwest premium as part of his ‘charts that make you go hmm’ series.
Below is the Fastmarkets US aluminium midwest premium chart which has some visually striking features. Our aim here is to breakdown the chart, with added analysis and the risks and opportunities beyond the US election results.
While every attempt is made to make sure that the information we share is relevant, market changing dynamics can negate our views or theories that we share here. As such, nothing here is set in stone or should be construed as investment advice.
Biden re-elected
- Biden presided during the covid era which saw the US aluminium midwest premium dip towards the long-term uptrend channel line (see blue line on the chart above)
- The severe dip in premium was the result of loss in demand as widespread lockdowns became the norm
- The recovery in the aluminium price produced a sharp vertical run and the peak in 2022 was mainly due to the Russia-Ukraine geopolitical situation
- A quick historical observation points to the Obama 2008 election where he presided over another Black Swan Event – namely the Global Financial Crisis (GFC). During the GFC, the premium traded and rebounded off the long-term uptrend line (similar with Biden during the covid period)
- Obama was re-elected in 2012 and the Midwest premium did dip for a while but continued to work its way higher again after it was known that Obama was re-elected
- Can Biden pull off a similar move?
Trump 2.0
- When Donald Trump was elected in 2016, the US aluminium midwest premium bottomed out and held on to the long-term uptrend support line
- The Trump administration – with the slogan ‘make America great again’ also spurred investment and spending, supporting the domestic premium
- Will we see similar spending spree if Trump wins office again in 2024?
- One could well make the assumption that if he is elected again as US President, the bias for the US midwest premium is skewed to the upside
A common pattern
- A quick observation to take away here is that the US aluminium midwest premium may have bottomed out and it would appear that whoever is the president, more upside could emerge over the next 12 to 24 months
- Also, we suspect that pre-US election jitters will keep the premium near the current low level but at a post-US election level (after November 2024), wee suspect that the premium will work its way higher again
- Should Biden get re-elected, there is a high probability that the midwest premium will edge higher the following year (see Obama second term in the chart)
Our aluminium short-term forecast for April is out now and only available on the Fastmarkets dashboard. Talk to us today to find out more.
