LIVE FUTURES REPORT 16/12: LME aluminium spreads continue to ease amid fresh 30k inflow

London Metal Exchange nearby aluminium spreads have continued to ease following a significant 30,400-tonne inflow of metal into LME-approved sheds in Singapore on Monday December 16.

LME aluminium stocks now total 1,403,075 tonnes, up by 49% from 942,125 tonnes on November 12.

LME global aluminium inventories have climbed consistently of late amid persistent spread backwardations, which have attracted metal back onto the exchange with holders of metal wishing to avoid the elevated cost of holding material.

But participants’ efforts to swing spreads back into contango have paid off to an extent, with consistent deliveries finally moving spreads, with the exception of cash-to-January, back into contango.

The benchmark cash/three-month spread was trading in a $13.25-per-tonne contango earlier on Monday, having dipped back into a $5.25-per-tonne contango on December 11 from a $4.25-per-tonne backwardation on December 10.

The cash-to-January spread, however, was recently trading in a $7-per-tonne backwardation.

An additional 14, 675 tonnes of aluminium were put back on warrant in Port Klang, Malaysia, with on-warrant stocks now totaling 1,309,000 tonnes.

The light metal’s three-month price continues to trade in a slim range this morning, trading down a marginal $3 per tonne on the previous trading day’s close at $1.765 per tonne, seemingly capped by continual deliveries of material onto the LME.

“Aluminium is being held down by endless metal being put into LME warehouses,” Kingdom Futures chief executive officer Malcolm Freeman said in a morning note.

Elsewhere, three-month price action across other LME base metals is equally lackluster, with volumes low across the board.

But the three-month copper price has been bolstered by better-than-expected Chinese industrial production and retail sales data, continuing to trade above $6,000 per tonne and up 0.7% to $6,174 per tonne from Friday’s 5pm close of $6,130 per tonne.

China’s industrial production growth accelerated to 6.2% year on year in November, outstripping the forecast 5.1% year-on-year gain, while retail sales rose by 8% over the same comparison versus the expected 7.6% increase.

“You have Chinese industrial production and retail sales beating forecasts, but that has only really lent support to copper,” Fastmarkets research analyst Andy Farida said. “Other metals are struggling.”

“The market remains on tenterhooks despite the ‘positive’ announcement that the United States and China have agreed a trade deal in principle. But a lack of details is making participants nervous,” Farida added.

Other highlights

  • The US dollar index was down by 0.09% at 97.09 this morning, but this has failed to stimulate appetite for base metals, with trading volumes remaining low and upward price action lackluster.
  • In data from Europe, flash services purchasing managers’ index (PMI) figures from France has increased by two percentage points to 52.4 month-on-month. Having been expected to decrease one percentage point to 52.1 over the same period.
  • Flash services PMI figures from Germany increased three percentage points to 52 month on month but the flash manufacturing PMI for the region decreased seven percentage points to 43.4 over the same period.
  • Flash services and manufacturing PMI data will be released from the US and the United Kingdom later today.