LME Aluminum Prices Plummet, Monthly Index at All-Time Low

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Aluminum_price_index_Chart_February-2014_MetalMiner

Our aluminum price index registered a value of 89 in February, a decrease of 3.3 percent from 92 in January.

The 3-month LME price closed on Tuesday at $1,686 per metric ton, the lowest level seen in the past 4+ years. Aluminum keeps struggling to reach previous peaks, but it doesn’t seem to have any problem with reaching new lows – a perfect definition of a downtrend.

We have been calling for lower aluminum prices in one of our recent MMI reports and this latest downward movement makes us even more bearish. Some have been arguing that prices were low and they couldn’t go even lower. We don’t share that opinion, and while the trend is in motion, we expect prices to keep going down.

historical aluminum prices 2013

Source: LME data, MetalMiner analysis

An interesting fact is the divergence seen in Alcoa’s stock price and aluminum prices.

While they usually move together, since 2013, Alcoa stock has been trending higher while aluminum prices have been falling. This divergence might be explained by the fact that stocks keep reaching new highs, giving support to Alcoa’s stock value while a stronger dollar keeps pushing commodities (and therefore metal prices) down:

Alcoa Inc stock vs aluminum price chart

Alcoa stock price (in green) vs. aluminum price (in red) since 2008. Created with stockcharts.com

Finally, the fact that increased premiums have benefited producers such as Alcoa could help to explain this divergence.

What This Means For Metal Buyers

Until the scenario changes, a falling aluminum market might suggest anything but taking long-term positions.

Key Price Drivers

After rising the previous month, primary cash aluminum prices dropped 6.1 percent on the LME to $1,663 per metric ton.

A 4.3 percent drop over the past month hit Chinese aluminum billet. After rising the previous month, Indian aluminum primary prices dropped 4.2 percent. The Chinese aluminum cash price declined 4.0 percent. Chinese aluminum scrap prices fell 1.8 percent after rising the previous month.

* Get the complete prices every day on the MetalMiner IndX℠

Korean 3003 coil premium over 1050 sheet, Korean 5052 coil premium over 1050 sheet, European 5083 plate, Chinese aluminum bar, European 1050 aluminum and Korean 1050 aluminum sheet did not budge the entire month.

Don’t forget to read January 2014 MMI analysis before February’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.