For many years now, investors have turned to ‘Doctor Copper’ for an indication as to the health of the global economy. The red metal is used in everything from construction to kitchenware, and so it’s seen as a pretty accurate indicator of economic health.
Eugen Weinberg, head of commodity research at Commerzbank, told the Wall Street Journal’s Moneybeat blog that all the red metal tells us about is the state of some large emerging markets, and, more specifically, China. It may even be in danger of going the way of the Baltic Freight Index – a previous barometer for trade activity based on transportation rates that has fallen out of favor (and was replaced by the Baltic Dry Index).
Aluminum, they say, may now be a better consultant.
“Copper’s relative position has deteriorated,” said Stephen Briggs, a base metals analyst at BNP Paribas. “Yes, it’s used in lots of different things, but … aluminum is [also] used widely.”
The aluminum market in more than twice the size of the copper market, and more than 50 million metric tons are produced every year, compared to 20 million tons of copper that is produced each year. It’s also used in a similarly vast range of products – from cans to cars.
On the downside, aluminum is more closely tied to oil and energy prices, because energy accounts for 40% of the cost of production. And critics say that distortions in the market, such as the high extra fee of getting the physical metal delivered, mean its thermometer isn’t better than copper’s.
The cash price of primary aluminum closed up Wednesday, January 28 at $1,847 per metric ton, halting two days of weakening prices on the LME with a 1.6% shift. Following a two-day drop, the aluminum 3-month price increased by 1.6% on the LME to $1,857 per metric ton. The Indian aluminum cash price weakened by 0.5%, settling at INR 113.70 ($1.85) per kilogram.
Chinese aluminum prices were mixed for the day. The Chinese aluminum cash price saw a 0.5% decline to CNY 12,690 ($2,033) per metric ton. Chinese aluminum bar prices saw a 0.5% decline to CNY 12,700 ($2,035) per metric ton. The price of Chinese aluminum scrap remained essentially flat at CNY 12,200 ($1,955) per metric ton. For the fifth consecutive day, the price of Chinese aluminum billet held flat at CNY 13,200 ($2,115) per metric ton.