Hot Summer: Aluminum Prices, Market Speculation and Capacity Cuts

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For aluminum market observers, 2012 has brought some interesting dynamics. Take for example prices – LME prices have hit a two-year low, while Midwest premiums have hit a high. Meanwhile China prices remain comparatively high. At the same time, lead times from LME warehouses continue to grow and have exceeded 12 months! At this year’s Harbor Aluminum conference, participants gained a much deeper understanding and appreciation for what drives aluminum markets. That has more to do with the careful skill and moderation of the program by a deep subject matter expert, Jorge Vazquez and his team of knowledgeable analysts.

So now, three weeks post-event, we wanted to share with MetalMiner readers what conference participants, after hearing from both analysts as well as a variety of pundits and producers say is driving some of these highs and lows. Participants answered a broad range of questions posed by Harbor and MetalMiner has re-posted a few of these.

On market speculation

Do you think speculative flows play a role in the determination of long term prices?

  • Yes a bit 42%
  • Yes, significantly 47%
  • Not really 11%

Shutdowns

After this session, I believe we will see aluminum capacity curtailments accelerate:

  • In East/Central China 21%
  • North America 9%
  • West Europe 26%
  • Oceania 10%
  • All of the above 33%

Raw material short supply

Which raw materials are you most concerned about sourcing in 2013?

  • Energy 20%
  • Aluminum 31%
  • Alloying agents – magnesium, silicon, manganese 9%
  • Aluminum scrap 26%
  • All of the above 14%

What’s driving Midwest premiums?

In your opinion what do you think is the greatest driver behind the current record levels in aluminum Midwest Premiums?

  • Physical demand 16%
  • Financing deals 19%
  • Market manipulation by a small group of traders 36%
  • Long queues 23%
  • Freight 7%

We will continue to cover aluminum market developments. Harbor Aluminum Intelligence provides daily market research and commentary. You can learn more about Harbor Aluminum here.

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