Weak demand, a flood of Chinese exports and robust Western supply, in spite of earlier smelter closures, have created a perfect storm of surplus in the aluminum market.
Shares of Alcoa Inc. stock have been collapsing over the past few months, falling more than 20% in only 8 weeks.
The aluminum giant, with earnings ahead on Wednesday, has experienced powerful earnings growth over the past four quarters; however, lower aluminum prices are weighing on its stock price.
It should come as no surprise that the monthly Aluminum MMI® registered a value of 83 in July, a decrease of 3.5% from 86 in June.
World aluminum production in May is up almost 12% year-on-year. That is the fastest growth rate since 2011.
LME Price Falling
Aluminum on the London Metal Exchange is back again below $1,700 per metric ton. This level acted as a floor in March 2014 and Alcoa investors are wondering if aluminum prices will rebound again this time, which would give a boost to Alcoa’s shares.
Unfortunately aluminum prices might need to fall further in order to cause additional non-Chinese closures to balance the market. Furthermore, the Chinese stock market is having a rough go of it. The Shanghai index is off over 30% from highs reached in June. Finally, the fact that commodity prices keep falling across the board makes a rebound in aluminum prices more unlikely. Aluminum buyers and Alcoa investors might want to think twice before betting on a rebound in prices…
Actual Aluminum Prices
Korean 1050 aluminum sheet prices fell 12.3% to $2.92 per kilogram. The Indian aluminum cash price fell 4.5% to $1.70 per kilogram. A 4.2% decline for the cash price of Chinese aluminum left it at CNY 12,440 ($2,003) per metric ton. Following a 4.0% decline in price, Chinese aluminum billet finished the month at $2,008 per metric ton. At $2,134 per metric ton, Chinese aluminum bar was down 3.8% for the month.
After falling 3.2%, Chinese aluminum scrap finished the month at $1,949 per metric ton. Last month, European 5083 plate prices dropped by 2.8% to $3,065 per metric ton. Last month, the cash price of primary aluminum dropped 2.7% on the LME to $1,646 per metric ton. With a 2.6% decline on the LME, the 3-month price of aluminum closed the month at $1,688 per metric ton. European 1050 aluminum fell a slight 0.4% over the past month to $2,907 per metric ton. At $3.36 per kilogram, Korean 3003 coil premium over 1050 sheet was down 0.3% for the month. Korean 5052 coil premium over 1050 sheet closed the month at $3.50 per kilogram after dropping 0.3%.
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.