As oil prices flirted with $55/barrel this week, U.S. shale drillers expanded production and most metals saw their prices rise as energy and transportation costs went up, too. What a better week to report strong price increases in the October MetalMiner IndX? But it wasn’t all climbing prices.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

The breakout metals star this year, zinc, has started to fall. Our own Raul de Frutos warns that it’s nothing to be worried about. Don’t expect zinc to turn bearish or anything. Meanwhile, in China, manufacturing provinces have found a way to curtail power costs, no matter what the price.

Liquid Molten Steel Industry

Why sell parts manufacturers boring ol’ formed products when you can sell them liquid aluminum that they can make into anything they want? Source: Adobe Stock/kybele.

As MetalMiner co-founder Stuart Burns explained, Chinese aluminum smelters are taking advantage of close proximity to manufacturers there to make molten aluminum — no refiring — their, umm, hottest product. Read more

Aluminum prices have risen this year, but not as much as other base metals. Aluminum continues to struggle near $1,700/mt, a level that prevented prices from rising three times this year.

3M LME aluminum near stiff resistance levels

Three-month LME aluminum near stiff resistance levels. Source: MetalMiner analysis of data.

Many analysts argue that this year’s rally is limited because they expect Chinese smelters to restart capacity in the fourth quarter. The argument is that now that aluminum prices are higher than at the beginning of the year, smelters making aluminum will be more profitable.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Some capacity has already been restarted, but the numbers are running short of analysts’ expectations. Despite all fears, it’s possible that aluminum output in China will not increase as most analysts are predicting. Why? Let’s look at the cost curve:

Energy Prices Rise

It takes a lot of energy to smelt aluminum. Indeed, energy accounts for around half of the cost for Chinese smelters to produce aluminum. While aluminum prices have increased 13% this year, thermal coal prices have surged near 70% this year. As energy prices increase, Chinese smelters are getting squeezed, making it tougher for them to expand production.

Oil prices near stiff resistance levels. Source: MetalMiner analysis of data

Oil prices near stiff resistance levels. Source: MetalMiner analysis of data.

For this reason, it’s not a surprise that oil prices, the main benchmark for energy prices, look very similar to aluminum. Oil prices are currently at a stiff resistance level near $50/barrel.

What This Means For Metal Buyers

Most analysts expect capacity restarts to weigh on aluminum prices. However, higher energy prices could prevent Chinese smelters from restarting capacity. Oil prices are now trading near a key level. If oil prices manage to trade above $50/barrel, we would expect aluminum to finally break above $1,700/mt.

Like steel, there has been some positive news about aluminum consumption in India. A research report said aluminum intake is poised to grow from 3.3 million metric tons in 2015-16 to 5.3 mmt in 2020-21.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

The report, “Indian Aluminium Industry: Geared for Growth,” is by global research and ratings agency Crisil and Mtlexs. It forecasts growth based on a combination of government initiatives such as “Make in India,” Smart Cities, Housing for All, and an increase in the transport of freight across the country.

Electrical Power Demand

The analysts say aluminum’s main demand would come from the power sector, since the white metal was now often used as a cost-effective, lightweight substitute for copper in transmission and distribution. In the coming five years, investments from state utilities and central government schemes worth millions of dollars are being planned to expand India’s transmission and distribution network.

The other sector that would drive the uptake is the automotive sector. The tightening of vehicular emission standards has forced automakers to look at aluminum to reduce vehicle fleet weight. India’s automobile sector is poised for heavy growth in the next five years.

As has become the norm, any news of increased consumption is accompanied by a downside: cheap imports. Like producers in the U.S., whose interests are being harmed by China’s exports of semi-finished products, India’s aluminum sector, too, as reported earlier by MetalMiner has been dogged by such imports. In India, imports make up almost 50% of the total consumption, largely from neighboring China. Just between 2011-2016, imports of aluminum increased 14%.

Smelters Want Tariffs

Aluminum majors such as Hindalco, Vedanta and Nalco have been urging the Indian government to impose a Minimum Import Price (MIP) to enable the domestic industry to take on what is being called as a “foreign economic invasion.”

Hindalco’s Managing Director Satish Pai was quoted saying such a government move would help the domestic industry compete with the cheap imports. He was addressing the recent World Non-Ferrous Conference 2016.

Two-Month Trial: Metal Buying Outlook

He said in the last five years, the imports from the ASEAN (free-trade agreement countries including Brunei Darussalam, Myanmar/Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam) had increased from 6% of the total refined imports to 31%. The Indian Mines Secretary has indicated that the government is examining the aluminum sector’s demand and would make a decision on the imposition of an MIP in the next 15 days.The Mines Ministry already held several rounds of discussions with aluminum industry leaders.

Our monthly MMI saw a boost in October as three metals tied for the biggest gain and markets seemed to tighten as manufacturers started to make decisions for their end of year and early 2017 spending.


There seemed to be a Q4 tightening across most of the metal markets we follow. Sure, the Rare Earths and Renewables MMIs were flat as a board yet again, but Copper, Aluminum, Stainless and Raw Steels all saw strong gains. Our Global Precious MMI gained again but almost immediately suffered a pullback after talk of a Federal Reserve interest rate hike in December and renewed strength from the U.S. dollar.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

As always, we exercise caution when buying. Today’s gain could be tomorrow’s loss.

A recent CRU note shined some useful light on how the reporting of aluminum inventory in China has been distorted by changes in the supply chain between smelters and downstream consumers. Our reporting of primary metal inventory generally measures exchange stocks of ingot, sows and t-bars, and adds in an estimate for off-market stocks held by trade buyers and the reported inventory held by smelters.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

It is a process that has generally held us in good stead for decades — with the one glaring omission of off-market stock and finance trade inventory running into millions of tons that we have no visibility on, but that’s another matter! Well add to that, says CRU, the changing nature of the Chinese aluminum manufacturing industry.

China’s Shadowy Aluminum Industry

Lured by cheap coal and, as a result, low-cost power, Chinese smelters have relocated in droves to the north and north east provinces, remote from traditional downstream clients on the east coast.

Liquid Molten Metal

Is the future of aluminum liquid? Source: Adobe Stock/kybele.

Transportation costs are high and can be unreliable, particularly in winter. So, Chinese customers have come to their metal suppliers, relocating cast-house and direct casting facilities adjacent to the smelters. The products they, in turn, produce are higher value and better able to absorb those transportation costs. So far, so good. Read more

With the closure of western aluminum smelters and widely reported global growth in demand of 5 to 6% per year, why have London Metal Exchange aluminum prices remained rangebound in the mid-1600s per metric ton? Why do physical delivery premiums continue to fall?

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Thomson Reuters recently reported that Japanese buyers have agreed quarterly premiums of $75 dollars per ton over the LME cash price for the shipments in the fourth quarter of this year. This will be the lowest premiums have been since Q3 2009 and a massive drop from the level Japanese buyers were paying in Q1 2015 when premiums reached $425 a ton. Read more

Chinese aluminum companies are looking to get into the lucrative aerospace and automotive markets while U.S. oil drillers are ramping up production with oil above $50 per barrel.

China Eyes Automotive, Aerospace Aluminum Markets

China’s giant aluminum makers are pushing into the global automotive and aerospace markets, with industry sources expecting their presence to heat up competition and possibly spark a buying spree for Western metals companies.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

China’s top aluminum companies are venturing into the more lucrative parts of the global value chain.

US Drillers Extend Rig Recovery

The number of oil rigs drilling in the U.S. rose again this week, extending one of its best recoveries with no cuts for 16 straight weeks, with analysts expecting more additions as crude prices hold over $50 a barrel. Drillers added 4 oil rigs in the week to Oct. 14, bringing the count up to 432, the most since February, but still below 595 rigs a year ago, according to energy services firm Baker Hughes Inc. on Friday.

It may be strong political lobbying or maybe a perception that the industry is crucial for economic development, but the aerospace and shipping industries have certainly avoided the worst of environmental regulation over the last decade or so.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

The energy and heavy industry sectors have borne the brunt of what some would call over-regulation. But that’s all about to change. 191 Countries gathered in Montréal last week to adopt a global market-based system to tackle the rise of carbon emissions from international air travel an article in the Telegraph explains.

Offset Market

Under the new deal, airlines will be expected to offset their emissions growth after 2020 by buying “offset credits” in line with their carbon footprint, the terms of the agreement layout. The carbon costs are expected to incentivize the industry to develop lower carbon fuels and more efficient technologies, according to the newspaper. Read more

Long row of rolls of aluminum in production shop of plant.

Long row of rolls of aluminum in production shop of plant.

Tuesday this week, aluminum prices traded with downside bias due in part to a rising dollar when compared to rival currencies, but that wasn’t the only major news to be found in the industry.

Alcoa, Inc., reported its third quarter earnings, which revealed a decrease in revenue while reducing its revenue targets due to lower aluminum prices and a shift in aerospace delivery schedules.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

It wasn’t all bad news for Alcoa, however, as the company reported profit improvement on a year-over-year basis.

Still, it is becoming more evident that conditions for the aluminum market remain challenging.

“Alcoa has moved to trim the costs of its aluminum production by shuttering its higher-cost U.S. facilities. Cheaper, more plentiful aluminum production from Chinese aluminum smelters have caused major struggles for North American aluminum companies. This has resulted in many cutbacks, and now North American production of primary aluminum is running at its lowest levels since 1983,” wrote Donald Levit for the Economic Calendar.

Aluminum MMI up in September

Our own Raul de Frutos wrote this week that our Aluminum MMI climbed 4% last month with prices for the metal rising above $1,600 per metric ton.

“However, we still need to see if this will surpass stiff resistance at $1,700/mt, a level that aluminum hasn’t overcome in more than a year,” de Frutos concluded.

How will aluminum and base metals fare for the remainder of 2016 and into 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:


Alcoa opened up earnings season with disappointing results and China seems to have sided with North Korea on U.N. sanctions on its coal exports.

Alcoa Earnings Disappoint

Metals manufacturer Alcoa, Inc., posted a higher third-quarter profit, but revenue fell and discouraged investors punished the company’s stock.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

In the final reporting period before it splits into two companies in November, Alcoa’s net income more than tripled from $44 million a year ago to $166 million in the third quarter. Excluding one-time items, adjusted net income increased 47.7% to $161 million. But total revenue fell 6.5% to $5.2 billion. The company cited “curtailed and closed operations” and lower pricing for its products. Alcoa asset sales are expected to total $1.2 billion for the year.

Alcoa shares plunged 10.7% to $28.15 at 2:15 p.m. Tuesday.

China Pushes Back on North Korean Coal Sales

China appears to have pushed back on a U.S. bid to close a United Nations. loophole that allows North Korea to export coal for “livelihood purposes,” saying the well-being of North Koreans is a priority in negotiations on possible new U.N. sanctions on Pyongyang.

Two-Month Trial: Metal Buying Outlook

Since North Korea’s fifth and largest nuclear test four weeks ago, the U.S. and China, a close ally of North Korea, have been negotiating a new draft Security Council resolution to punish Pyongyang.