aluminum price

Seems that somebody forgot to tell the automotive metals that the bear market was still going on this month. Strong aluminum and high-strength steel demand, and end-user purchases, have again made auto the standout in a field of mostly down markets.

After flattening in April, the monthly automotive MMI® registered a value of 87 in May, an increase of 2.4% from 85 in April. A big factor was the performance of aluminum coil on the index, as its index broke resistance and soared as well.

Pool 4 Tool's Automotive SRM Summit

China removed export taxes on aluminum, opening more markets up to the automotive-grade sheet and coil prices that automakers in the West have been experimenting with for a decade now. Prices of palladium, lead and even copper also notched strong LME growth filling strong demand from domestic and foreign automakers.

Consumer Sales Rising

In the US market, April new car sales rose by 5% from a year ago, to more than 1.463 million units as predicted in a J.D. Power and LMC Automotive's mid-month auto sales forecast update. April's totals are anticipated to be the highest since April 2005.

SUVs and smaller "crossover utility vehicles" were the main leaders in the sales surge. While not all US automakers posted strong Q1 results, profits were generally up even if they were up lower than some analysts expected. General Motors' results were better than in the same period a year ago, when costs associated with safety recalls limited quarterly profit to $125 million.

Fiat Chrysler Automobiles reported a profit of $101.2 million (€92 million) d​uring the first quarter compared with a loss of $173 million (€190 million) during the same period last year.

What This Means for Automotive Buyers

Consumer demand for automobiles traditionally picks up in the summer months, so this could be the beginning of a big turnaround for our Automotive MMI®. Fundamentals continue to look strong as the index had better supply and demand numbers than other metals even when it was losing price ground. Stay tuned.

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Outlays for US construction projects fell 0.6% in March to a seasonally adjusted annual rate of $967 billion, the US Commerce Department said last week. Commerce also revised February’s result to show almost no change.

Why Manufacturers Need to Ditch Purchase Price Variance

Despite the lower spending, the monthly Construction MMI® registered a value of 74 in May, on par with April's value. Flat is, apparently, the new up until construction starts and spending pick up some steam. The low prices have not yet incentivized developers enough, it would seem, to sign off on new projects or increase purchasing for anything but stockpiling, as credit is still hard to obtain and consumer demand for commercial and residential space remain tepid.

Energy Loans Called In

In fact, banks in the US are cutting credit lines to energy companies and forcing the firms to cough up more collateral to guard against fallout from the fall in oil prices.

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The US International Trade Commission upheld tariffs against both rebar and, more recently, oil country tubular goods (OCTG) from China, but the flood of imports has already done its damage when it comes to both traditional construction and the steel pipes used for oil and gas drilling. Supply is high and demand is simply not high enough to push prices upward.

It's a testament to the resilience of the US construction market that our MMI was even able to hold steady this month. For complete prices, read the complete story – log in or sign up for MetalMiner membership!

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MetalMiner's aluminum price index, the monthly Aluminum MMI®, registered a value of 90 in May, a significant increase of 2.3% from 88 in April.

Aluminum on the London Metal Exchange is back above $1,900 per metric ton, breaking short-term resistance to hit a four-month high.

China Ends Export Taxes

China erasing aluminum export taxes didn't seem to weigh down on prices; however, aluminum premiums took a beating when the news of China’s removal of export taxes came.

As my colleague Stuart Burns wrote in a recent article, the tax removal should reduce the domestic surplus of metal, supporting domestic prices and depressing prices in overseas markets. With current primary production counting for about 75% of total primary capacity, Chinese producers will have the ability to increase production without creating any shortages in China's domestic market.

Even outside China, production has been ramping up over the past six months. UC Rusal and Alcoa, Inc. have responded by closing older and less-efficient capacity, but even so, both they and other primary producers are investing in new capacity at the same time. Demand for aluminum remains robust, but the excess of supply is something that is clearly bugging aluminum producers.

Certainly, the supply outlook doesn't explain the recent price increase. However, the recent weakness in the dollar does. The dollar index is experiencing some turbulence for the first time in more than 9 months and that supported aluminum and most industrial metal prices in April.

Battery Research Continues

In other aluminum news this month we also had Stanford University  building an aluminum-ion battery prototype that offers various improvements over lithium-ion batteries. These aluminum-ion batteries will potentially make consumer electronics safer, charge faster and allow thinner or even flexible-form factors.

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Several news articles this week have led with comments made by UC Rusal executives regarding the price of aluminum. The FT led with Rusal battles with LME on aluminum price and Reuters added Rusal plays down concerns of Chinese aluminum flooding market.

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All of which says to me, Rusal is worried sick that a combination of falling physical delivery premiums and rising Chinese product exports are going to depress aluminum prices this year and into the medium term. The fact is, there is no shortage of aluminum and, although demand continues to grow robustly, supply is growing faster.

Primary Producers Opening New Capacity

Mills such as Rusal’s and Alcoa, Inc.‘s have manfully responded by closing older, less-efficient, higher-cost capacity but even so both they, and other primary producers, are investing in new capacity at the same time. Production outside of China has been creeping higher over the last five months.

Reuters’ Andy Home tells us it’s creeping up to the tune of an annualized 650,000 metric tons. Part of this is older European plants being purchased and restarted by smaller players. Part is new capacity such as Alcoa’s Ma’aden joint venture plant in Saudi Arabia. Likewise, while Rusal has closed older, higher-cost plants it is now talking about a ramp up of it’s 600,000-mt per year Boguchansk plant in Siberia, although, admittedly, only the first 150,000 mt phase for next year.

Semi-Finished, Completely Sold and Shipped

Meanwhile, China exported 1.07 million mt of mostly semi-finished products in the first quarter of this year, representing a year-on-year increase of 353,000 mt. Although December’s almost 500,000 mt was an outlier, the removal of a 13% export tax on May 1st and the consideration of further tariff reductions signals that Beijing has no intention of reining in this overcapacity, but rather is setting course to support domestic producers as domestic demand slows.

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The American Institute of Architects‘ Architecture Billings Index came in positive, again, in March, but its relatively low increase again reflected the weak recovery in both design and construction. The March ABI score was 51.7, up from a mark of 50.4 in February.

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“Business conditions at architecture firms generally are quite healthy across the country. However, billings at firms in the Northeast were set back with the severe weather conditions, and this weakness is apparent in the March figures,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “The multi-family residential market has seen its first occurrence of back-to-back negative months for the first time since 2011, while the institutional and commercial sectors are both on solid footing.”

Multi-Family Weakness

We have reported on the general weakness in multi-family residential and its effect on prices of construction materials such as structural steel and copper for much of the first quarter of 2015.

AIA prepared a video featuring Baker, recorded in a swanky Architect Magazine studio overlooking our nation’s capital, describing the macroeconomic issues facing the construction market, which include the strong dollar and the continuing shortage of skilled construction labor, in Q2 and the rest of the year.

With April's reading, MetalMiner's monthly price index tracking metals used in the automotive industry has stanched its general downward slide – the index dipped below the baseline of 100 in February 2014 and has been trending down since. The monthly Automotive MMI® registered a value of 85 in April, on par with March's value (check out last month's report). But with most base metals markets in a bearish mode, this index may have further to fall.

The downward slide had particularly begun accelerating in Q4 of last year and has continued through Q1 2015, a sign that the auto index's basket of metals has seen the same bearish treatment as the Raw Steels, Stainless and Aluminum MMIs.

US Auto Sales 'n Oil Prices–March 2015

Of the US Big Three, GM and Ford's March sales both dropped this year compared to March 2014, while Chrysler gained nearly 2% in its monthly sales over last year. However, both GM and Chrysler's year-to-date sales so far in 2015 are quite robust over the same amount of time in 2014 (5.3% and 6.5%, respectively), while Ford's YTD sales are also in the green.

Bargain-basement oil prices have helped consumers at the gas pump, which in turn has spurred sales. Light truck sales, for example, have been outpacing car sales for the past 15 months, and have spiked to their highest level in several years in March 2015. Primary metal producers are on the bullish demand bandwagon as well – Alcoa recently received the promise of government cash for lightweight auto-grade aluminum production.

Essentially, the automotive OEMs and their suppliers should be paying close attention to our Automotive MMI® trend – with finished steel, aluminum, platinum and palladium at multi-month lows, while consumer vehicle demand appears to be high, some spot buying could be in order...but we can't say for sure how much further this index has to fall. MetalMiner will, however, be offering an exclusive automotive metal market outlook...

SRM Automotive Summit

If you happen to be in Southeast Michigan in May – and chances are, if you work for an auto OEM or many of their suppliers, you already will be – join MetalMiner Executive Editor Lisa Reisman at the POOL4TOOL SRM Automotive Summit, to be held at the Townsend Hotel in Birmingham on Friday, May 22.

Lisa will present "Sourcing Strategies for the Automotive Metals: H2 2015." Don't miss out this analysis and a great overall event – register here.

This Month's Actual Metal Prices: Automotive MMI®

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Aluminum has slowly and quietly regained some of the price strength it closed out 2014 with, but that might not be enough to pull the light metal out of this bear market.

The monthly Aluminum MMI® registered a value of 88 in April, an increase of 1.1% from 87 in March.

The Strongest of A Weak Metals Field

Aluminum prices remained rangebound in March. Compared to the rest of base metals, though, aluminum is holding its price very well. Indeed, aluminum and zinc are the only metals that haven't made multi-year lows yet in 2015. Demand growth in the automotive and aerospace sectors has helped the metal to hold onto its value.

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Aluminum lost most of its gains in the second half of 2014. In Q1 2015, prices remained rangebound as oil prices stabilized and the dollar caught a breath. What should we expect for the rest of the year?

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The once-robust global construction market fell further this month as, here in the US, price-cutting by OPEC has caused large oil and gas projects to fall below their breakeven payback points.

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Heavy energy construction as fallen and the fragile single-family home market is not strong enough to pick up the slack.
The monthly Construction MMI® registered a value of 74 in April, a decrease of 1.3% from 75 in March.

Oil is Now Too Cheap to Pull Out of the Ground

The effects of oil and gas drilling suspensions have been felt by producers of steel pipe used in the field (oil country tubular goods) and that lack of production showed up the past two months in the form of canceled or postponed exploration projects.

Without the robust growth in civil drilling projects here in the US, construction spending fell in February as the numbers were also pulled down by a drop in single-family home building. Private spending on construction of single-family homes declined 1.4%.

The pullback in exploration is, however, not just a US problem. A key “supply-based” response to low oil prices has been a sharp decline in rig counts and reductions in 2015 capital expenditure budgets from major oil companies, including ConocoPhillips, Chevron, Hess, and BP. These multinationals spend much of their exploration budgets 0n projects in the US but Brazil and other energy-rich nations could see projects canceled as well

The “power” category of the US Census Bureau — which includes oil and gas facilities — is down by 17.2% year-on-year and 4.5% for the month. That sector of the construction industry is simply going to have to wait until energy prices rise again.

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LME copper prices, Chinese lead prices, and Korean aluminum premium prices rose this week, while US HDG steel prices and US palladium prices dropped. For exact price points of all of these and more, click below!

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After its first negative score in 10 months, the Architecture Billings Index (ABI) showed a small increase in design activity in February, and has been positive 10 out of the past 12 months.

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As an economic indicator of construction activity, the ABI reflects a 9-to-12-month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI score was 50.4, up slightly from a mark of 49.9 in January. This score reflects a minor increase in design services (any score above 50 indicates an increase in billings).

Questions about the uneven recovery in both residential and commercial construction are keeping the US architectural design market from growing more than the slight increases and small decrease of recent months.

Health of Major US Construction Sectors

“The health of the institutional market has been the key factor for positive business conditions for the design and construction industry in recent months, and it is encouraging to see that sector remain on solid footing,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “However, we’re seeing some slowing in the other major construction sectors. Design billings for residential projects had its first negative month in more than three years, and commercial design billings have seen only modest growth in recent years.”

A sector that's not covered by the ABI, infrastructure spending, is experiencing growing pains, as well. Many economists are projecting that the Federal Reserve will raise interest rates this summer, which could increase borrowing costs and potentially affect infrastructure construction, according to US News and World Report. Several economists say that infrastructure spending is badly needed and that Congress should look at alternative ways to fund construction, including raising the gas tax and increasing public-private partnerships.

Residential and commercial construction could see a lack of available credit, as well, if the Fed signals that interest rates could rise sooner rather than later.

Key February ABI Highlights

  • Regional averages: South (52.5), Midwest (50.2), Northeast (48.0), West (46.7)
  • Sector index breakdown: institutional (52.2), commercial / industrial (51.4), multifamily residential (48.9), mixed practice (45.3)
  • Design contracts index: 50.0

For exact week-over-week price trends in metals used in the construction industry, click below!

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