The Mitsui Daily Aluminium Wrap 8-Nov-19

Table Of Contents Page

Trump Sows Doubt on Trade Talks With Pushback on Tariff Unwind 2
Rusal Rebuilds Contract Share to Near Pre-Sanctions Level 2
Aluminium Touches Near Two-Month Peak, But Seen Vulnerable 3
Preliminary Nov. Michigan Sentiment Rose to 95.7, Est. 95.5 3
U.S. Wholesale Inventories Fell 0.4% in Sept. vs -0.3% Forecast 3
ICBC Standard Bank Plans to Shut Base Metals, Equities Units 4

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LME Select 3M Range Official Cash & 3M Averages (Ask Price)

Cash Cash Cash 3M 3M 3M SHFE
Open High Low Last 1D Δ Settlement MTD YTD Offer MTD YTD US$
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Other Base Metals Currencies U.S. Futures

LME Select 3M Last 1D Δ High Low Contract Settle 1D Δ
Copper 5923.00 -78.00 EUR 1.1055 1.1017 Copper DEC 19 268.20 (4.55)
Nickel 16180.00 -35.00 JPY 109.48 109.08 Gold DEC 19 1,462.90 (3.50)
Lead 2111.00 -1.50 AUD 0.6906 0.6848 Silver DEC 19 16.82 (0.19)
Zinc 2494.00 3.00 CNY 7.0006 6.9685 Plat. JAN 20 893.10 (20.90)
Tin 16775.00 200.00 CAD 1.3237 1.3172 Pall. DEC 19 1,708.60 (69.20)
Cobalt 36000.00 0.00 GBP 1.2825 1.2769 Crude DEC 19 57.43 0.28
Molybdenum 0.00 0.00 NatGas DEC 19 2.79 0.017

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 Press Cuttings
Trump Sows Doubt on Trade Talks With Pushback on Tariff Unwind
Bloomberg

President Donald Trump said that the U.S. hasn’t agreed to roll back all tariffs on China, diluting hopes the U.S. would
make such a concession to secure a trade deal. “They’d like to have a rollback, I haven’t agreed to anything,” Trump
told reporters Friday. “China would like to get somewhat of a rollback -- not a complete rollback, because they know I
won’t do it.”

U.S. bonds rallied and stocks slipped after the president’s remarks reduced some of the optimism that had been
increasing around the prospects for a truce. On Thursday, signs were pointing toward a first-phase deal that would
include a tariff rollback. China’s Ministry of Commerce spokesman Gao Feng said negotiators had discussions and
“agreed to remove the additional tariffs in phases as progress is made on the agreement.” White House economic
adviser Larry Kudlow also said Thursday that “if there’s a phase one trade deal, there are going to be tariff agreements
and concessions.”

Trump made clear Friday that the U.S. hasn’t yet reached an agreement and emphasized that he wouldn’t eliminate all
tariffs. There is an expectation that tariffs scheduled for Dec. 15, which would hit popular consumer items like
smartphones and toys, won’t take effect as part of an initial deal. But a lot of tariffs remain in place including a 15%
tariff on an additional $110 billion in goods that took effect Sept. 1. China’s exports and imports continued
to contract in October, data released Friday showed, though slightly less than forecast by economists.

The escalating trade war between the two countries has also taken a toll on U.S. manufacturing and business
investment. Trump also revived questions Friday about the location for signing any deal with his Chinese
counterpart Xi Jinping. The leaders had initially expected to meet at an international summit in Chile this month, but
the gathering was canceled because of protests in the capital, Santiago.

Reports earlier this week indicated any finalization of a first-phase agreement might slip until December and that some
U.S. locations had been ruled out. “Assuming we get it, I don’t like to talk about things until they happen, but it could
be Iowa or farm country or some place like that,” the president said Friday. “It will be in our country, but it could be
some place like that.”

Rusal Rebuilds Contract Share to Near Pre-Sanctions Level

Bloomberg

United Co. Rusal, which had U.S. sanctions lifted in January after about 10 months, increased the share of value-added
products in its sales to near the level seen before penalties were imposed. The share of value-added products reached
40% of total sales in the three months ended Sept. 30, Chief Executive Officer Evgeny Nikitin said in an earnings
statement Friday. That’s up from 29% in the first quarter and compares with about 50% before sanctions were
imposed in April 2018.

Nikitin said he expects the share to be fully restored by the start of 2020, following the so-called “mating season.”
Semi-finished aluminum, or high-value added products, is usually sold under annual contracts typically signed during
the fall. Rusal missed last year’s season as clients were wary of signing supply deals while the company was under the
cloud of U.S. sanctions.

The pick up in contracts comes as the company reported a 22% drop in adjusted earnings before interest, taxes,
depreciation and amortization in the third quarter from three months earlier. Revenue declined 3.1%. The shares fell

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3.6% in Hong Kong. Rusal said that global primary aluminum demand will be flat in 2019 at 66 million tons, compared
with an August guidance for an increase of almost 2%. “Overall uncertainty in the market due to trade tensions
between China and the U.S., coupled with a global contraction of manufacturing activity, may continue to negatively
affect aluminum prices by the end of this year,” the company said.

Aluminium Touches Near Two-Month Peak, But Seen Vulnerable

Reuters

Aluminium prices climbed to the highest in nearly two months on Friday, but they were likely to run out of steam with
producers on the sidelines ready to hedge, analysts said. The price of aluminium, mainly used in transport, construction
and packaging, has rallied 6% over the past two week, largely fuelled by bearish investors buying back their short
positions.

But the global market is expected to flip into a surplus next year, according to analysts polled by Reuters. "I think
whether it's got legs from here is pretty questionable. You don't have anything to suggest that the fundamentals are
improving," said Marcus Garvey, commodities strategist at Macquarie in London.

"One of the things that aluminium is going to run into up here is... producer hedging starting to appear again in the
market. On a margin basis, given the fall we've seen in price of alumina over the course of this year, it's not a bad level
for some people to start hedging." A climb in the dollar index to the highest in over three weeks would also encourage
forward selling by producers, Garvey added.
Aluminium prices were capped on Thursday by "evidence of a producer offer", Dee Perera at broker Marex Spectron
said in a note.

Preliminary Nov. Michigan Sentiment Rose to 95.7, Est. 95.5

Bloomberg

The preliminary University of Michigan consumer sentiment survey for Nov. rose to 95.7 vs. 95.5 prior month.
 Forecast range 92.0 to 98.5 from 52 estimates
 Current economic conditions index fell to 110.9 vs. 113.2 last month.
 Expectations index rose to 85.9 vs. 84.2 last month.
 Expected change in median prices during the next year unchanged at 2.5% vs. 2.5% last month.
 Expected change in median prices during the next 5-10 years rose to 2.4% vs. 2.3% last month.
 Below are comments from the report:
o The early November data found that consumers were more likely to anticipate good rather than bad
times in the overall economy during the year ahead and were more likely to expect a continuous
expansion rather than a downturn sometime in the next five years.
o Householders below age 45 anticipated annual gains in household incomes of 4.4% in early
November, up from 3.9% in last November’s survey

U.S. Wholesale Inventories Fell 0.4% in Sept. vs -0.3% Forecast

Bloomberg

Sept. wholesale inventories decreased to $676.7b vs $679.5b in prior month, the Census Bureau said
 Wholesale inventories forecast range -0.3% to -0.1% from 14 economists
 Aug. inventories revised to 0.1% rise from 0.0%
 Wholesale inventories excluding oil fell 0.4% in Sept.
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  Wholesale sales unchanged in Sept. after falling 0.1% the prior month
o Wholesale sales excluding automobiles rose 0.3% in Sept.
 Inventory/Sales ratio at 1.36 in Sept. after 1.36 in the prior month
o Auto inventory/sales ratio at 1.80 in Sept., highest since May 2009

ICBC Standard Bank Plans to Shut Base Metals, Equities Units

Bloomberg

ICBC Standard Bank, a venture between the biggest lenders in China and Africa, will close its base metals and equities
businesses because of poor performance and difficult market conditions. The changes will affect 150 jobs and will take
place in the first half of 2020, according to a statement from the London-based lender. The bank will keep other
businesses, including precious metals and energy, and the decision is subject to shareholder approval.

“We are addressing our cost base and are taking measures against a backdrop of continuing unfavorable market
conditions to ensure a position of long-term, sustainable strength,” said Chief Executive Officer Wenbin Wang. “If the
closures are approved, we will work on an orderly wind down of client positions.”

The closure comes amid a period of heightened turmoil in the raw materials industry as the trade war, slowing
economic growth and shifts in technology disrupt traditional markets. Other commodity traders have struggled in the
current environment. Cargill Inc. said in August that it’ll close the base-metals desk at its risk-management unit.
Goldman Sachs Group Inc., for decades Wall Street’s dominant commodities trader, also made cuts to the division
earlier this year, a person familiar with the matter told Bloomberg News in March.

ICBC Standard Bank, also known as ICBCS, is 60% owned by Industrial & Commercial Bank of China Ltd. and 40%
by Standard Bank Group Ltd. The bank suffered a $15 million loss last year after declining appetite for emerging-
market risk and reduced investment flows hit its trading business. U.S. sanctions against aluminum producer United
Co. Rusal also sparked volatility in its base-metals business.

Market conditions have continued to deteriorate for the group. Standard Bank wrote down the value of its holding in
ICBCS to $220 million at the end of September, from $383 million previously. It’s engaging with ICBC to determine
the best way forward for the business, it said in a filing last month. The base metals business includes aluminum,
cobalt, copper, nickel, lead, tin and zinc, according to its website. It also has precious metals, crude oil and refined oil
products businesses with offices in London, New York, Singapore and Shanghai.

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