The US dollar index slipped on Friday as the euro rose sharply. LME base metals traded higher across the board on Friday April 12. LME aluminium advanced about 0.3% and SHFE aluminium popped 0.1%.

LME closed the week lower at 1843.50 per tonne on Friday. As the US dollar weakened, three-month LME aluminium rallied from a month-low of US$1,846 per tonne on Friday, and closed 0.3% higher at US$1,864 per tonne. The trading level of LME aluminium remained below all moving averages. Weak fundamentals are likely to cap upside room in LME aluminium, which is expected to trade at US$1,850-1,880 per tonne today.

As on April 12, LME aluminium cash (bid) price stood at US$ 1843 per tonne, LME official settlement price stands at US$ 1843.50 per tonne; 3-months bid price stands at US$ 1864 per tonne, 3-months offer price is US$ 1865 per tonne; Dec 20 bid price stands at US$ 1995 per tonne, and Dec 20 offer price stands at US$ 2000 per tonne.

The LME aluminium opening stock dropped to 1081975 tonnes. Live Warrants totalled at 692650 tonnes, and Cancelled Warrants were 389325 tonnes.

LME aluminium 3-months Asian Reference Price is hovering at US$ 1862 per tonne.

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Base metals traded at LME have enjoyed their best quarterly performance in Q1 since 2009. The LMEX index rose by 9.1% for the period, while prices of all metals gained, with the exception of lead whose price remained unchanged. The best performer was nickel, soaring by over 21%. As so often, the main contributor to this price growth was China – the country’s official Purchasing Managers’ Index (PMI) rose to 50.5 and private manufacturing survey index Caixin’s PMI to 50.8 in what is indicative of both indices’ entering an expansive phase that is well above expectations. Stimulus measures taken by the government and Central bank have already provided their desired impact, but the tax cuts that are effective as of April 1 should further support China’s economic growth.

Another boost to base metals came after both China and the United States announced “new progress” in the latest round of trade talks that wrapped up on April 5 in Washington. During a meeting with Chinese Vice Premier Liu He, US President Donald Trump declared that both countries were close to a trade deal, even if some details still need to be worked out before a final agreement can be reached. Nonetheless, the prospect of finally resolving long-standing trade issues led speculative financial investors to expand their net long positions in copper, aluminium and nickel in the last week of March, the LME’s statistics showed.

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domestically. The tariffs, according to them have only made domestic products more expensive and uncompetitive.

They have also opposed the import quota system proposed by the government for Canada and Mexico in lieu of tariffs and said that that will create a deficit for aluminium for US downstream buyers.

“Unfortunately, the tariffs have done nothing so far to stop China’s trade-distorting behaviour in the market,” said Jean-Marc Germain, CEO of Constellium, which makes rolled aluminium at 24 sites in North America, Europe and Asia.

“What it does is increase the cost of our products,” he added.

He indicated the six per cent growth in aluminium production in China and the following growth in export despite the implementation of tariffs.

As shown by a study by a Paris-based Organization for Economic Cooperation and Development, government subsidies to the aluminium industry in China were worth US$70 billion over the last five years.  Another study by George Mason University shows U.S. importers have obtained tariff waivers on 86 per cent of the products indicating the futility of the tariffs.

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Base metals prices have recovered significantly since January’s lows after news that the US and China are inching closer to signing a trade deal. According to reports, both sides will lower or remove tariffs upon signing a trade agreement, but it is still unclear whether US Section 232 tariffs on steel and aluminium imports from China will stay in place. Beijing is also expected to grant foreign investors better market access in certain fields, while foreign (US) intellectual property would be awarded more protection. Regardless of the final agreement, it is evident that both sides will be able to claim a great victory and the consensus opinion among analysts is that the outcome will spur on metal prices.

This expectation explains the pressure base metals prices came under in mid-March on news that the planned meeting between Donald Trump and Xi Jinping for the signing of a trade deal will take place in late April, at the earliest. Shortly after that, base metals prices rose again with increasing backwardation after Chinese Premier Li Keqiang announced Beijing will roll out on April 1^st a planned cut in value-added tax (VAT) from 16% to 13% for manufacturing industries (instead of May 1, as previously expected). This shows that metal prices are intertwined with developments in China.

But all of these developments didn’t help much the aluminium price: the cash LME price has been trading below US$ 1900/tonne since December 24, 2018, averaging US$ 1853 /t in the first two months of 2019. The aluminium price (cash, LME) rose on March 19 to over US$ 1900 /tonne (US$ 1907.5/t) for the first time since December 21, on news of a cyber-attack on Norsk Hydro.

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