Technical Analysis: Aluminum Prices Nose-Diving To Record Levels

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The aluminum story doesn’t seem to be getting much better (for producers like Alcoa, anyway).

MetalMiner’s monthly Aluminum MMI® registered a value of 91 in December, a decrease of 3.2 percent from 94 in November. Three-month aluminum on the London Metal Exchange experienced the biggest drop in the complex, falling yesterday to $1,746 per metric ton, the lowest level we have seen in the last four years. Some people believe we will see a bounce since aluminum prices have reached a support area.

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However, aluminum, like other base metals, remains in a long-term downtrend. As we can see in the following graph, since the price reached its top in May 2011, prices have continued to fall and new peaks always seem lower than previous ones.


Prices tend to follow their current trend until the trend breaks and forms a new trend. For this reason, in the current scenario, if a price bounce occurs, it will likely not move above the previous top.


With that said, a technical analysis of these graphs suggests no sign of an immediate upswing. On top of that, the aluminum market continues to face over-supply. As the Wall Street Journal recently reported, “worldwide aluminum production exceeded demand by 1.2 million tons in the first nine months of the year. That is more than double the 539,000-ton surplus recorded over the whole of 2012.”

What This Means for Aluminum Buyers

Both technical and fundamental analysis suggests aluminum prices will continue to struggle. It looks risky to call an early bottom in aluminum prices. We wouldn’t suggest readers place any forward buys, but we do suggest watching the market closely for new signals. For near-term requirements, it might make sense to buy down during a falling market.

Take advantage of MetalMiner’s aluminum price forecasting capability today.

Key Price Drivers of the Aluminum Index

Over the month, on the LME, the cash price of primary aluminum fell 6.7 percent to $1,710 per metric ton. Following a 6.5 percent decline, the 3-month price of aluminum reached $1,753 per metric ton on the LME.

A 6 percent drop left the cash price of primary Indian aluminum lower. European 1050 aluminum fell 2.0 percent. Last month, the cash price of Chinese aluminum dropped 1.4 percent. The price of Chinese aluminum billet drifted 1.4 percent lower. Chinese aluminum scrap was also down, dropping 0.7 percent for the month.

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Korean 3003 coil premium over 1050 sheet did not budge the entire month. Korean 5052 coil premium over 1050 sheet held pat too. Last month was consistent for Chinese aluminum bar. Korean 1050 aluminum sheet traded sideways. Prices for European 5083 plate remained generally constant as well.

Don’t forget to read November 2013 MMI analysis before December’s full report comes out next week!

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.