Russian aluminium

Metals – Share of Russian aluminium in LME warehouses grows Industrial metals (except for nickel) edged higher in the morning session as China trimmed its short-term policy interest rate unexpectedly. The People’s Bank of China lowered its 7-day reverse repurchase rate by 10bps to 1.9% in a sign that Beijing has been taking measures to support flagging economic growth. The move also provides some confidence to the market that China could take further steps to push up economic growth.   Recent data from LME shows that the share of Russian aluminium inventory out of total exchange inventory increased to 68% in May from 52% in April following increased withdrawals of aluminium from LME warehouses in Asia. The data shows that there was a total of 263,125 tonnes of Russian aluminium in exchange warehouses, while Indian-origin aluminium stood at 116,800 tonnes falling from 46.5% in April to 30% in May. Meanwhile, the exchange said that 19% of the 167,550 tonnes of aluminium requested for delivery in May was still Russian metal.   Agriculture – USDA slashes weekly corn crop ratings on dry weather The United States Department of Agriculture's (USDA’s) latest crop progress report shows that US soybean plantings continue to rise with 96% planted as of 11 June, well above the 87% seen at the same stage last year and above the five-year average of 86%.     Similarly, spring wheat plantings are 97% complete, which is above the 92% planted at the same stage last season, and in line with the five-year average. On the crop condition, the agency rated around 38% of the winter wheat crop in good-to-excellent condition, up from 36% a week ago, and 31% seen last year. On the other hand, the USDA rated 61% of the corn crop in good-to-excellent condition as of 11 June, lower from 64% a week ago and 72% seen at the same stage last year, largely on account of dry weather.   The USDA’s weekly export inspection data for the week ending 8 June pointed towards weakening demand for US grains. USDA’s export inspections of corn stood at 1,169.1kt in the abovementioned period, lower than the 1,206.8kt in the previous week and 1,221.8kt reported a year ago. For wheat, US export inspections stood at 246.6kt, down from 304.4kt from a week ago and 411.9kt reported a year ago. Meanwhile, US soybean export inspections fell to 140.2kt compared to 222.3kt from a week ago and 609kt from a year ago.

The Commodities Feed: EU sanction plans on Russian aluminium An easing USD offered support to the commodity complex, with oil prices edging higher this morning. On the inventory side, API numbers remained largely bullish for the oil market. Meanwhile, recent reports of EU plans to sanction Russian aluminium helped to lift aluminium prices.   Energy – Weaker USD supports the complex The oil market has been trading higher this morning as a sharp drawdown in oil inventories reported by API helped to improve the broader sentiment. Meanwhile, a softer dollar also supported the complex. The prompt spread for Brent has moved into a deeper backwardation of US$0.43/bbl up from just US$0.03/bbl at the start of the year, indicating tighter near-term conditions. Recent numbers from the American Petroleum Institute (API) reported yesterday remained largely constructive. US crude oil inventories fell by 6.67MMbbls over the last week, significantly larger than the market expectations. Similarly, Cushing crude oil stocks are reported to have decreased by 2.03MMbbls. On the other hand, a sharp rise in gasoline stocks weighed on demand expectations. API reported that gasoline stocks jumped by 7.2MMbbls while distillates inventories fell by 0.25MMbbls, over the week ending 19 January. The more widely followed EIA report will be released later today. Meanwhile, the geopolitical situation in the Middle East remained uncertain. Qatar delayed LNG shipments to Europe as the ongoing tensions in the Red Sea are slowing shipment deliveries. It has been reported that Qatar has diverted at least six shipments heading to Europe from its regular Red Sea route since 15 January. However, despite the transport challenges, Qatar has not reduced its LNG exports with shipments for the last two weeks estimated to be up 7% compared to the same period last year. The gas market has managed to remain largely unaffected so far with the recent disruptions in the Red Sea. European gas futures continue to trade near six-month lows due to weak industrial demand, availability of alternative LNG supply and higher inventory levels.

Metals – Aluminium gains on EU sanction threats Aluminium prices rose over 3% yesterday and led the gains among base metals after reports suggesting the possibility of further sanctions by the European Union on Russian aluminium. There are speculations of a potential complete ban on aluminium imports in the upcoming Russian sanctions package scheduled to be released next month. Russian metals had broadly escaped sanctions until last month, when the UK prohibited British individuals and entities from trading physical Russian metals, including aluminum, nickel and copper. UK is the only country in Europe to have adopted such measures. This could potentially lead the LME to reopen the debate over whether it should ban deliveries of Russian metal. Just under 80% of the aluminium on the LME was of Russian origin at the end of November. Steel inventories at major Chinese steel mills rose for a second consecutive week to 15.4mt in mid-January, up 6.7% compared to early January, according to data from the China Iron and Steel Association (CISA). This indicates that Chinese mills are restocking inventories as they remain optimistic about the near-term demand outlook. Meanwhile, crude steel production at major mills rose 3.7% from early January to 2.09mt/d in mid-January, as many mills resumed production activities post-maintenance. In nickel, the data from the International Nickel and Study Group (INSG) shows that the global nickel market remained in a supply surplus of 35,300 tonnes in November, when compared to a marginal surplus of 7,800 tonnes in the same period last year. Earlier, the global nickel market saw an oversupply of 26,000 tonnes in October as well. Cumulatively, the nickel market encountered a supply surplus of 212,500 tonnes in the first eleven months of 2023, up from the surplus of 80,200 tonnes seen in the same period last year. Lastly, the latest LME COTR report released yesterday shows that investors decreased net bullish positions for copper by 2,478 lots for a third consecutive week to 54,375 lots in the week ending on 19 January. Similarly, money managers reduced net bullish bets in aluminium by 4,459 lots for a second straight week to 109,596 lots as of last Friday. In contrast, net bullish bets for zinc rose by 2,322 lots (after reporting declines for two straight weeks) to 29,776 lots at the end of last week.