aluminum price

Last week, aluminum prices on the London Metal Exchange fell below $1,500 per metric ton for the first time in more than 6 years.

Aluminum 3M LME below $1500-mt

3-month LME aluminum is now below $1,500 per mt. Source: MetalMiner analysis of data.

The Aluminum Association commented this month to the US-China joint presidential statement as good progress on environment but also said more needed to be done regarding China’s overproduction.

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The new environmental law implementations promised by the presidential statement should provide incentives for carbon-intensive aluminum smelters in China to be weeded out.

It still looks like the market doesn’t have high expectations for aluminum. The oversupply in China continues to hit investor sentiment and analysts don’t expect China’s aluminum producers to close capacity anytime soon, despite the fact that many of them are underwater. China keeps adding production in its western provinces, where coal-based power is cheap.

Aluminum producers in the US are getting hurt the most, facing one of the darkness periods in aluminum history. The low price damage convinced Alcoa, Inc. split into 2 companies. The firm has found that its legacy smelting business, the company’s vertically integrated structure, is not the advantage it once was.

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Aluminum hitting another price low just adds to the already bearish sentiment across metals markets. We can’t expect metal prices to turn around yet while we see this sort of weakness in individual metals like aluminum.

The monthly Aluminum MMI® registered a value of 77 in September, a decrease of 3.8% from 80 in August.

Aluminum_Chart_September-2015_FNLThe 3-month London Metal Exchange aluminum price fell as low as $1,506/mt, the lowest level in more than 6 years as the continuous sell-off in Chinese shares is raising worries about a slump in aluminum demand from the world’s largest aluminum consumer.

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The latest trade data provided more negative news from China for the commodity sector, showing that China’s industrial slowdown is sharpening. Weaker demand from overseas buyers helped to further aggravate the trade slide in August.

Production Correction

Aluminum production in China fell 1.3% in July from a record in June, showing that the lowest prices in 6 years are forcing some smelters to cut output. Chinese smelters proposed to cut the less cost-efficient plants and delay the opening of new facilities. These cuts will take time to help aluminum prices as Chinese smelters already ramped up output this year with new lower-cost capacity.

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Like with other base metals, the low prices are hurting aluminum producers who are now facing one of the most painful periods in years. Century Aluminum Co. said in August that it would begin cutting production in October, blaming low aluminum prices caused by low-priced Chinese exports. The company’s stock price is down an astonishing 80% on the year to date.

What This Means For Metal Buyers

Like with other base metals, low prices will eventually cause producers to shut down capacity. However, with a bearish commodity environment, a strong dollar and weak global demand, it is hard to tell when prices will make a comeback. We could see more price declines before we see the bottom of this commodity market cycle.

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US construction spending rose in July to the highest level in over 7 years as private construction outlays surged, providing another sign of solid economic momentum at the start of the third quarter.

Construction spending increased 0.7% to $1.08 trillion, the highest level since May 2008, the Commerce Department said on Tuesday. June’s outlays were revised up to show a 0.7% increase instead of the previously reported 0.1% gain.

Meanwhile, the monthly Construction MMI® – tracking the key industrial metals used in the construction sector – registered a value of 69 in September, a decrease of 4.2% from 72 in August, another all-time low.


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Construction spending has increased for 8 straight months. Economists polled by Reuters had forecast construction outlays rising 0.6% in July. Construction spending was up 13.7% compared to July of last year.

Chinese Oversupply

Still, no matter how much the US construction sector booms – both residential and non-residential construction are hitting multiyear highs – prices are staying low mostly due to oversupply and a sharp decline in Chinese demand.

China Construction Bank Corp., the nation’s second-largest lender, reported zero profit growth and rising bad loans as the government struggles to prop up the economy.

Net income for the three months ending June 30 was 64.9 billion yuan ($10 billion), unchanged from a year earlier, based on an exchange filing on Sunday. That was below Bloomberg analysts’ expectations.

After the stock market crash there last week, China’s economy is still in freefall and it’s unlikely that the world’s second-largest economy can be counted on to restore its falling construction activity in the short term. Beijing is, rather, doubling down on export stimulus policies, such as devaluing their own currency, and tacitly encouraging overproduction of base metals at home. This actually increases oversupply and hinders supply-demand equilibrium.

Export destinations such as the US and now Mexico are responding, as one would think, with anti-dumping investigations and tariffs but price relief in most of those cases is still far off.

Here in the US, construction spending in July was buoyed by a 1.3% jump in private construction spending to the highest level since April 2008. Spending on private non-residential construction projects surged 1.5% to the highest level since October 2008.

What This Means for Metal Buyers in Construction

Until oversupply, particularly from China, of construction products such as rebar and H-beam steel is dealt with, it is unlikely that prices will reverse course and rise soon.

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US auto sales remain the bright spot in the drivers of the monthly Automotive MMI®.

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Seasonally adjusted annual rate of sales for light vehicles rose to 17.8 million compared with 17.3 million a year earlier and was the highest since July 2005, according to researcher Autodata Corp. August was the fourth consecutive month that adjusted sales remained above the 17 million mark.

Automotive August-2015The Automotive MMI® still registered only a value of 73 in September, a decrease of 3.9% from 76 in August. Weak prices for most of the base metals that make up the index (HDG, copper, aluminum and lead) abound despite strong end user sales in the US. In China, auto sales are falling with the rest of the domestic economy there.

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China Again

Chinese auto sales fell by 7.10% in July 2015 compared to July 2014, the largest fall since February 2013 and such a large economy’s fall is dragging down the prices of automotive metals just as it is dragging down the prices of oil and other commodities.

Major iron ore producers, Rio Tinto PLC, BHP Billiton, Vale SA and Fortescue Metals Group Limited have ramped up production again despite massive iron ore and steel oversupply. believes they intend to continue exploring for iron ore in Australia despite lower growth forecasts from China and weaker iron ore prices, betting on continued strength in iron ore demand over the long term.

What This Means For Metal Buyers

This is normal behavior from major miners such as the Big Three (Rio, BHP and Vale) and almost-there cousin Fortescue. They can make a profit by squeezing volume out of their mines at low prices based on scale, alone, but iron ore investment is coming from non-traditional miners, as well.

India’s Essar Steel is making a $1.9 billion investment in the steelmaking ingredient in Minnesota, of all places. It’s difficult to imagine how such an investment makes long-term sense for Essar without a turnaround in both iron ore and steel prices. Since high-strength automotive steel alloys are one of the best-performing steel products on today’s market, it’s even more difficult to imagine those prices turning around without continued strong auto sales in the US and Europe and a turnaround in China and other emerging markets.

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The Construction MMI® fell again in July, despite strong US non-residential construction and accelerating growth in Europe.

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Metals and energy commodities, such as oil and liquid natural gas, continue to fall on international indexes mostly due to the weak economy and lax demand in China, the world’s second-largest economy. The recent volatility in Chinese stock markets shows no sign of abating.


The private Caixin/Markit manufacturing purchasing managers’ index (PMI) for China dropped to 47.8 in July from 49.4 in the previous month.

Chinese Economy Still Falling

It is worse than a preliminary reading of 48.2 and is the fifth consecutive month of contraction in the sector. With falling demand in such a large market, it is difficult to foresee a turnaround in the metals that make up our index. The Construction MMI® registered a value of 72 in August, a decrease of 2.7% from 74 in July.

While construction activity is strong in the US and Europe, emerging markets and China continue to drag down prices and overproduction of materials for export is actually exacerbating oversupply.

Try Not to Catch Falling Knives

The oversupply in aluminum, in particular, is worsening. Alcoa, Inc., recently raised its forecast for the global aluminum surplus, expecting a surplus of 760,000 metric tons this year which is almost double Alcoa’s previous forecast.

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It remains a good time to be a buyer with double-digit declines in fuel surcharges and lower prices across the board for all construction products including rebar and H beams tracked in the index. With the price of oil back below $50 a barrel we are likely to continue to see falling US fuel surcharges and lower cost transportation and shipping charges.

Construction purchasing in the US is now a waiting game as estimators and project executives questions become some version of “how long do I wait before buying” to achieve a truly low price before markets bottom out, rather than how quickly to purchase to avoid non-existent price spikes.

The Construction MMI® collects and weights 9 metal price points used within the construction industry to provide a unique view into construction industry price trends over a 30-day period. For more information on the Construction MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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As China goes, so too does the rest of the world, and that has been none more painfully clear than with the plummet of aluminum prices. China export volumes continue to be a main driver for this industrial metal’s decline. You can learn all about it, in addition to how other industrial metals are faring, by subscribing to our new Monthly Metal Buying Outlook.

China Export Volumes

We touched on the rise of Chinese aluminum exports back in April, as the Far East nation continued its transition into a consumer economy and, in turn, saw its domestic demand for aluminum fall off. However, that didn’t stop the Chinese from commissioning a new plant later this year that has the ability to produce upwards of 2 million tons of finished aluminum.

With so much aluminum being produced and so little domestic demand, what is a nation that has historically had issues unloading the product to do? The Shanghai Futures Exchange price has helped alleviate China’s difficulty exporting aluminum by dropping relative to the LME, allowing Chinese producers to better compete across Asia.

Just last month, the sharp increase in Chinese aluminum exports (35% year-over-year) raised a few eyebrows, most notably from Alcoa Inc.‘s Klaus Kleinfeld, who claimed the nation’s surging export figures were skewed by semi-finished products. The 2.5 million metric tons of unwrought aluminum and related products in the first half of 2015 equaled a 650,000-mt increase compared to the year prior.

At the Mercy of China’s Aluminum Producers

According to the Wall Street Journal, China accounts for about half of the world’s aluminum production and its producers are showing no signs of relenting their output of the metal despite plummeting prices. This is not what the rest of the market wants to hear.

“Chinese production is growing faster than in the rest of the world,” Ivan Szpakowski, Hong Kong-based analyst with Citi, told the news source. “Most producers in China are still making money, especially the ones with new capacity.”

Although the strength of the dollar has benefited aluminum producers outside the US to offset China’s export volumes, something has to be done as the global aluminum market could reach a surplus of 3 mmt of the metal before year’s end.

“China’s government should realize that huge exports are significantly influencing lower prices at the London Metal Exchange and it hurts primary producers not just outside China, but in China too,” Goran Djukanovic, an independent aluminum analyst, told the WSJ.

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You can find a more in-depth aluminum price outlook and forecast in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

The monthly Aluminum MMI® registered a value of 80 in August, a decrease of 3.6% from 83 in July.


The combined impact of stronger output and weaker demand from China are adding to the global aluminum surplus. Chinese exports remain strong (up 35% year-on-year in the first half of the year) and the recent Chinese stock market sell-off has only raised worries about a bigger-than-expected economic slowdown and the latest figures seem to agree with the market.

Purchasing Down Again

China’s July flash Purchasing Managers’ Index came in at 48.2. China’s PMI has been below 50 for five consecutive months. Figures below 50 are generally associated with a fall in manufacturing activity.

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Mix all this information together, add a strong dollar and a falling commodity market and there you have it: Aluminum prices hit a fresh six-year low.

With aluminum now nearing $1,600/mt, prices are close to or below the cost of production for a big portion of global capacity. This is hurting the profitability of aluminum producers and investors are well aware of that.

Producers Predicting Surpluses

Alcoa, Inc., recently raised its forecast for the global aluminum surplus, expecting a surplus of 760,000 metric tons this year which is almost double Alcoa’s previous forecast. The aluminum giant managed to offset declines in aluminum prices through its growth in its aerospace, automotive and alumina businesses. However, that hasn’t changed the minds of investors who have contributed to Alcoa’s shares dropping 40% year to date.

What This Means For Aluminum Purchasers

These price declines not only hurt producers, but also the profitability of buying organizations that believe prices can’t go lower and proceed to buy big volumes to meet future demand. It’s never too late to have a strategy – don’t be caught on the wrong side of the trend.

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There was no joy in automotive metals this month as prices retreated again amid ample supply and not enough worldwide demand.


The monthly Automotive MMI® registered a value of 76 in August, a decrease of 7.3% from 82 in July, another all-time low for the index. Before the last two months, its previous low was 85.

Steel Prices Falling

Base metals remain in a bearish market, one that’s starting to edge on historic proportions. Also, a glut of imported steel in the US market continues to drive down prices domestically while the lack of demand overseas only exacerbates the problem here.

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US steelmakers have been forced to rely on anti-dumping actions again in hopes of creating some semblance of market equilibrium.

Steel is not the only ingredient in the Automotive MMI and its fall has been helped along liberally by steep falls for aluminum, palladium, platinum and copper.

Vehicle Sales Faltering

At least in the US, sales of automobiles are still strong, too. A sales collapse in China is one of the many effects of the stock market crash and slow economic growth there.

“There’s excessive competition and automakers are building excess capacity, and to raise utilization of the plants, they will engage in excessive selling,” Fumihiko Ike, chairman of the Japan Automobile Manufacturers Association, said in reference to the market many are looking at to create global sales increases.

The Chinese market is generally regarded as one that provides higher sales margins to manufacturers and Volkswagen, BMW and other manufacturers are taking on a hit on sales there.

With a continuing metals surplus and only the US end-user market in decent shape, it’s difficult to predict a turnaround for the Automotive MMI. The Thomson Reuters/Jefferies CRB Commodity Index is hitting new lows as well.

Actual Automotive Metals Prices

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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.

Alcoa’s Slide

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.

Alcoa Inc (AA) Stock Price 2 years out

Alcoa, Inc. (AA) Stock Price 2 years out. Chart: MetalMiner.

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.

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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.

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Through half of 2015, US auto sales are on track to hit record levels not seen in 15 years. After climbing more than 4% through July annual sales could approach the previous annual record of 17.4 million if they stay on this pace.

Yet, none of that demand seems to be helping automotive metal prices.

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As robust as the US automotive market is, it can’t entirely make up for sluggish sales elsewhere that are depressing demand for metals such as steel, aluminum and copper and pushing our index further down. Even the exhaust system metals, platinum and palladium, saw a deep dive this month.

Chinese New Car Sales Barely Growing

New car sales grew just 1.2% in China this May. Further complicating matters, is the fact that the nation of 1.37 billion is starting to develop a used car market and it’s looking very much like Chinese consumers like paying less for a used car, rather than paying more for a new one. What a shock?

This is, of course, bad news for raw materials suppliers as the massive Chinese auto market only recently transitioned to automobiles being the main form of transportation. Less-metals intensive bicycles and motorbikes had filled that role until recently.

Chinese steel and aluminum manufacturers had been counting on more robust growth from the domestic new car market and a strong used market could stunt the advances many were planning to reap from new car sales.

Bearish Market Hits Home

The monthly Automotive MMI® registered a value of 82 in July, a decrease of 3.5% from 85 in June.


As we have documented liberally, the strong US dollar has created a bearish environment for all metals and automotive inputs are no exception. The steep fall observed this month in palladium, a metal that had previously held our automotive index up, was an example of just how much the bearish market is affecting even metals with strong demand. Palladium hit a two-year low this month and the bottom, subsequently, fell out of an already listing price index.

Copper, zinc and lead also fell significantly.

What This Means for Automotive Metal Buyers

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The drama surrounding Greece’s debt is compounding the bear market and, while it hasn’t yet caused strong currencies such as the dollar to see significant gains, its potential to do so threatens all commodities.
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The Automotive MMI® collects and weights 7 metal price points used in automotive production to provide a unique view into automotive metal trends over a 30-day period. For more information on the Automotive MMI® constituent metals and their exact price movements, log in or register below!

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