COLUMN- U.S. aluminium’s negative price puzzle as premium crashes – by Andy Home (Reuters U.S. – May 27, 2020)

LONDON, May 27 (Reuters) – Aluminium has been one of the industrial metals hit hardest by the coronavirus. The London Metal Exchange (LME) price hit a four-year low of $1,455 per tonne in April and is struggling to recover, last trading at $1,525.

Inventory has surged, with 663,475 tonnes of metal placed on LME warrant since the middle of March, lifting headline exchange stocks to a three-year high of 1,493,775 tonnes.

COVID-19 has crushed both demand and price with a collective producer supply response lacking. Poor global market dynamics look even worse in North America, where the physical premium has imploded since March.

So severe has been the collapse that aluminium could be facing its own WTI oil moment with the premium turning negative. Conceptually at least.

In reality, unlike the April meltdown in the WTI oil contract, no-one in the United States is going to be trading a negative price for their metal. The U.S. aluminium market remains defined by the 10% import tariff introduced by the Trump Administration in May 2018.

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