LME Aluminum Price Still Low, CME Futures Contract Has Potential

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The monthly Aluminum MMI® registered a value of 90 in June, an increase of 1.1 percent from 89 in May.

Aluminum_Chart_June-2014_FNL

With aluminum prices remaining low and the Midwest premium high, we are keeping an eye on the new CME aluminum futures contract which was launched about a month ago. The contract is still in an early stage, but seems to be gaining popularity as on Tuesday it traded its largest volume day since its inception, with 293 contracts and interest continuing to grow.

FREE Download: The Monthly MMI® Report – covering the Aluminum market.

Three-month aluminum closed the month of May at $1,855 per ton on the LME, not a big move from last month.

3M LME aluminum price since 2013

3M LME aluminum price since 2013. Graph: MetalMiner analysis.

Some are saying that the aluminum surplus will go away this year on the argument that producers will continue to curtail unprofitable smelting capacity. However, by this point you should be tired of hearing these arguments over and over again while prices keep falling.

We hope that by now you have already realized that the cost of production doesn’t determine the value of a metal. It’s what people are willing to pay that determines the price.

Aluminum price target_opt

Graph: MetalMiner analysis.

We would recommend buyers focus on the facts. At the end of the day, these are only opinions.

Aluminum remains in a falling market and nothing indicates aluminum is turning up. Buyers should ride the trend and hedge/buy forward when the trend is actually changing. Trying to pick up bottoms can be a costly strategy.

What This Means For Metal Buyers 

Aluminum remains at low levels, but there are no signals of real price risk for 2014. We would recommend aluminum buyers keep riding the trend and not take long-term positions until prices break above $2,000/ton.

Key Price Drivers

After dropping the previous month, the price of European 5083 plate prices rose 3.9 percent to $3,450 per metric ton. The primary aluminum cash price rose 3.1 percent on the LME to $1,823 per metric ton after falling the previous month. At $2,915, European 1050 aluminum finished the month up 2.4 percent per metric ton. After dropping the previous month, the aluminum 3-month price prices rose 2.4 percent on the LME to $1,856 per metric ton. The Indian aluminum cash price closed the month up 2.4 percent at $1.87 per kilogram.

Prices for the cash price of Chinese aluminum remained constant this past month, holding at around $2,128 per metric ton. Hovering around $3.66 per kilogram for the month, Korean 3003 coil premium over 1050 sheet remained unchanged. At a price of $3.81 per kilogram, Korean 5052 coil premium over 1050 sheet did not budge the entire month. Chinese aluminum bar traded sideways last month, staying around $2,272 per metric ton. Hovering around $2,174 per metric ton for the month, Chinese aluminum billet remained unchanged. Prices for Korean 1050 aluminum sheet remained constant this past month, holding at around $3.61 per kilogram. Last month was consistent for Chinese aluminum scrap, which did not move from $1,960 per metric ton.

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.

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