Top 8 Aluminum Market Drivers
1. Dollar to Euro exchange rate
2. China export volumes
3. MW Premiums
4. Capacity utilization
5. Primary aluminum production
6. Oil prices
7. European & Japanese premiums
8. China GDP & PMI data
Aluminum Market Commentary: Oversupply is the Word
Despite a strong start during the early part of May, as the US dollar entered a small correction, aluminum prices have continued their downward price movement with the other industrial metals. If the dollar continues its moves to the upside — and we have no reason to believe that trend has changed — aluminum will likely remain in a bear market.
Several indicators tell us the state of aluminum supply. Traders have reported Chinese bar products have now entered European markets cost-competitively, the first time in five years, as a result of the Chinese export tax change reported last month. In addition, service centers have ample aluminum stocks and global aluminum producers have reported extremely short lead times — in some cases days, and in other cases longer than three weeks!
MW premiums as well as global aluminum premiums continue to fall. Meanwhile queues in the LME warehouse system have indeed shortened. However, the LME aluminum forward curve has returned to “normal,” meaning the spot to 18-month price shows a 10% difference, enough to restart the stock and finance trade, soak up excess ingot and place a floor under physical delivery premiums.
Three-month aluminum closed the month of May at $1,742/mt, down from last month. As we reported last month, the current environment points to aluminum prices trending lower through the end of the year and on that basis, making long-term commitments appears risky until we see real signs of strength.
So What Should My Industrial Buying Strategy Be?
This aluminum price forecast was excerpted from our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds, consult the FREE June report: