Aluminum has slowly and quietly regained some of the price strength it closed out 2014 with, but that might not be enough to pull the light metal out of this bear market.
The monthly Aluminum MMI® registered a value of 88 in April, an increase of 1.1% from 87 in March.
The Strongest of A Weak Metals Field
Aluminum prices remained rangebound in March. Compared to the rest of base metals, though, aluminum is holding its price very well. Indeed, aluminum and zinc are the only metals that haven’t made multi-year lows yet in 2015.
Demand growth in the automotive and aerospace sectors has helped the metal to hold onto its value.
Aluminum lost most of its gains in the second half of 2014. In Q1 2015, prices remained rangebound as oil prices stabilized and the dollar caught a breath. What should we expect for the rest of the year? Two factors make us expect more on the downside:
- Although aluminum demand might be experiencing some growth, supply is rising as well. Weaker energy prices are encouraging producers to step up production, especially in China where smelters are also able to sustain production better because of government support for lower power tariffs.
- A bearish commodity environment and a still strong dollar will continue to put pressure on aluminum prices. Nickel, a metal that was showing a similar behavior to aluminum, recently fell to a 6-year low. It will not just be nickel falling prey to this market. Looking at the performance of other base metals, it wouldn’t be rare to see aluminum making record lows this year.
- Finally, the long-term trend for aluminum is down. Last month, we pointed out that the stock prices of aluminum-related companies are suffering significant declines and that might suggesting that investors are turning bearish on aluminum again.
What This Means For Metal Buyers
It’s hard to imagine aluminum making a significant upside move this year. It is more likely to be the opposite. We wouldn’t recommend aluminum buyers to rush into placing forward buys as aluminum prices might be due to further weakness.
After dropping the previous month, the Chinese aluminum cash price prices rose 3.2% to $2,138 per metric ton. Following a 3.2% change in price, Chinese aluminum billet closed the month at $2,139 per metric ton. The price of European 5083 plate rose 2.6% to $3,157 per metric ton after falling the previous month. For the second month in a row, the price of Chinese aluminum bar increased, rising 2.3% over the past month to $2,249 per metric ton. Chinese aluminum scrap gained 0.8% to finish the month at $2,031 per metric ton. After dropping the previous month, the price of Korean 1050 aluminum sheet prices rose 0.6% to $3.44 per kilogram. The price of Korean 3003 coil premium over 1050 sheet rose 0.3% to $3.48 per kilogram after falling the previous month. After dropping the previous month, the price of Korean 5052 coil premium over 1050 sheet prices rose 0.3% to $3.62 per kilogram.
European 1050 aluminum prices decreased by 1.2% this month, ending at $2,766 per metric ton. The aluminum 3-month price saw a small decline on the LME this month, falling from $1,806 to $1,790 per metric ton. The Indian aluminum cash price decreased by 0.7% this month, ending at $1.81 per kilogram. The cash price of primary aluminum ended the month on the LME at $1,789 per metric ton, down from $1,789.
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.