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US aluminium import tariffs short-term bullish – Report

Metal News - Published on Fri, 23 Feb 2018

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Fast Markets reported that imposition of import tariffs and/or quotas by the US government on aluminium and aluminium products could push Asian premiums up in the short term but drive them down in the long term. US Secretary of Commerce Wilbur Ross on February 16 recommended a series of tariffs and/or quotas in addition to existing duties in place on aluminium and steel imports following the department’s Section 232 investigations into imports of the products.

A Singapore-based trader suggested that “It is hard to quantify the impact on Asian premiums in the next one to two weeks, or at least until the market returns from [Chinese New Year] holidays. But there could be a knee-jerk response in the near term. If US premiums rise, Asia premiums will climb too.”

Aluminium premiums in Asia are largely unchanged this week, with spot trading remaining slow due to the continued holiday-related absence of some industry participants. Metal Bulletin assessed the South Korean P1020 premium at USD 98-120 per tonne on February 20, unchanged from last week.

US aluminium premiums will rise should the US impose import tariffs and quotas on aluminium and aluminium products, market observers agree.

American Metal Market’s assessment of the P1020 premium has been rising since before Ross delivered his recommendations to the White House. The assessment on February 13 at 13-13.5 cents per lb marked an upswing of more than 40% since the start of the year.

Higher US aluminium premiums could see producers divert supply to the US, reducing supply to Asia and hence provide support for Asia premiums, a second Singapore-based trader said.

Mr Ross said that “If US premiums increase swing tonnages will go to the US, which can lead to supply pressures in Asia.”

But the near-term outlook for premiums in Asia is also complicated by the backwardation in nearby London Metal Exchange aluminium spreads, which could put downward pressure on premiums in the region if it persists, industry sources noted.

A third Singapore-based trader said that “The backwardation is a tough situation for traders. If the backwardation continues for another half month or longer, premiums will decrease. If the backwardation is sustained till mid-March, it could even affect Q2 MJP premiums.”

The backwardation in the February/March 2018 spread has sparked huge deliveries of the metal into LME-listed warehouses. On February 13, some 166,225 tonnes were delivered into LME system the largest single delivery of aluminium into LME warehouses since March 19, 2014.

These deliveries briefly swung spreads back into contango but the cash/three-month spread then returned to a huge backwardation of USD 50 per tonne today, while the March/April 2018 spread is at a narrow contango of USD 0.25 per tonne.

Talks between global aluminium producers and Japanese buyers for second-quarter aluminium supply to main Japanese ports are set to start soon, with one producer already offering USD 135 per tonne to some buyers in Japan.

Rising US and European aluminium premiums and expectations of strong demand during the second quarter are likely to raise the second-quarter premium from the first-quarter settlement of USD 103 per tonne cif.

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Posted By : Amom Remju on Fri, 23 Feb 2018
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