Weak demand, a flood of Chinese exports and robust Western supply, in spite of earlier smelter closures, have created a perfect storm of surplus in the aluminum market.
Shares of Alcoa Inc. stock have been collapsing over the past few months, falling more than 20% in only 8 weeks.
The aluminum giant, with earnings ahead on Wednesday, has experienced powerful earnings growth over the past four quarters; however, lower aluminum prices are weighing on its stock price.
It should come as no surprise that the monthly Aluminum MMI® registered a value of 83 in July, a decrease of 3.5% from 86 in June.
World aluminum production in May is up almost 12% year-on-year. That is the fastest growth rate since 2011.
LME Price Falling
Aluminum on the London Metal Exchange is back again below $1,700 per metric ton. This level acted as a floor in March 2014 and Alcoa investors are wondering if aluminum prices will rebound again this time, which would give a boost to Alcoa's shares.
Unfortunately aluminum prices might need to fall further in order to cause further non-Chinese closures to balance the market. Furthermore, the Chinese stock market is having a rough go of it. The Shanghai index is off over 30% from highs reached in June. Finally, the fact that commodity prices keep falling across the board makes a rebound in aluminum prices more unlikely. Aluminum buyers and Alcoa investors might want to think twice before betting on a rebound in prices...
The Aluminum MMI® collects and weights 12 global aluminum price points to provide a unique view into aluminum price trends over a 30-day period. For more information on the Aluminum MMI®, how it's calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.