SMP
Strong regional price alignment
Europe
SMP supply tightens
EU SMP prices have moved sharply upwards in the first week of September, after almost two years of only small fluctuations. Futures prices shifted particularly quickly, but also the physical market appreciated by almost EUR 150/t in a fortnight to the current level of EUR 2600-2650 ex works. There is still sufficient supply of H1 product available, but with the high concentrate price there is little incentive to keep drying facilities running at high capacity. Buyers may be getting a little nervous about their short forward coverage and it will be interesting to see how much latent demand will surface in the next few weeks.
Americas
Mexican demand shifts the market balance
With Mexico’s return to the market the feeble market balance of disappointing output of NFDM being paired with substandard demand has come to an end. Mexican demand has improved now that children are back in schools and resellers find themselves short covered for the run up to the national holidays of Q4 that always represent a strong consumption period. At the same time, the solid pull of milk into Class III is leaving less availability for Class IV at a time that US milk output continues to shrink seasonally and so the knife cuts on both sides. This pulled NFDM prices up to USD 1.34/lb (2954/t) ex works. Medium heat (MH) SMP also continues to enjoy quite good appetite from export markets such as Korea and Japan and consequently the price for MH powder has risen to USD 1.25/lb (2755/t) ex works. Going forward, there are no signs of either further supply strengthening or demand weakening so it looks like prices have found their range for the next few weeks.
Asia-Pacific
Solid demand for Oceania product
The combination of solid demand and quite tight global supply drove SMP prices in the APAC region up to around USD 2800 FOB. Pre-GDT the buyside was far from eager to step in for new deals and focused on stretching their inventories a little longer, but the early September session did in the end provide confirmation of the new price level. That this comes at a time that the volumes on offer are rising seasonally proves that the buying interest comes not only from the APAC region. Supply tightness in the EU and the US make Oceania powder the product of choice for most importers, and with Northern hemisphere production shrinking there is limited downward price pressure at the moment.
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