The Davis Index for P1020A climbed higher on supply concerns after Canada expressed its fears from new tariffs levied by the US if they continued to ship material.
The Davis Index for P1020A premium moved up by 0.8¢/lb to 10¢/lb delivered US under the three-month LME Aluminum contract on Monday, while the 6063 billet premium remained unchanged at 6¢/lb delivered under the same LME contract.
The three-month LME aluminum contract closed on Monday, $1,718/mt up by $17.5/mt from $1,700.5/mt on July 27.
Canada has reduced the amount of material they offer into the US to stay under the radar and prevent any new tariffs on primary aluminum entering the US. This lack of supply has opened the door for a higher premium.
The shipments of P1020A from Canada to the US increased by 46pc in Q1 2020 compared with the same period last year. However, the latest data from the Aluminum Association of Canada indicates that exports of the material could fall by 30pc in July compared to the previous month.
Canadian producers pushed back on the idea of new tariffs citing the newly signed USMCA agreement and the uncertainty related to the COVID-19 pandemic, which should allow some leeway in trade between neighboring countries. They have also argued that additional tariffs will only weaken both the nations against the imminent threat from excess capacities posed by China. If the premium were to climb to around 15¢/lb, it could open the door for imports from other countries to enter the US and weaken the USMCA agreement’s foundation.