The monthly Aluminum MMI® registered a value of 80 in August, a decrease of 3.6% from 83 in July.
The combined impact of stronger output and weaker demand from China are adding to the global aluminum surplus. Chinese exports remain strong (up 35% year-on-year in the first half of the year) and the recent Chinese stock market sell-off has only raised worries about a bigger-than-expected economic slowdown and the latest figures seem to agree with the market.
Purchasing Down Again
China’s July flash Purchasing Managers’ Index came in at 48.2. China’s PMI has been below 50 for five consecutive months. Figures below 50 are generally associated with a fall in manufacturing activity.
Mix all this information together, add a strong dollar and a falling commodity market and there you have it: Aluminum prices hit a fresh six-year low.
With aluminum now nearing $1,600/mt, prices are close to or below the cost of production for a big portion of global capacity. This is hurting the profitability of aluminum producers and investors are well aware of that.
Producers Predicting Surpluses
Alcoa, Inc., recently raised its forecast for the global aluminum surplus, expecting a surplus of 760,000 metric tons this year which is almost double Alcoa’s previous forecast. The aluminum giant managed to offset declines in aluminum prices through its growth in its aerospace, automotive and alumina businesses. However, that hasn’t changed the minds of investors who have contributed to Alcoa’s shares dropping 40% year to date.
What This Means For Aluminum Purchasers
These price declines not only hurt producers, but also the profitability of buying organizations that believe prices can’t go lower and proceed to buy big volumes to meet future demand. It’s never too late to have a strategy – don’t be caught on the wrong side of the trend.
This Month’s Exact Prices and Trends
The price of Korean 3003 coil premium over 1050 sheet closed the month at $3.02 per kilogram after dropping 6.6%. Korean 5052 coil premium over 1050 sheet prices fell 6.3% to $3.14 per kilogram. A 4.1% drop over the past month left Chinese aluminum scrap at $1,866 per metric ton.
On the LME, the 3-month price of aluminum closed the month at $1,625 per metric ton after dropping 3.8%. The Indian aluminum cash price fell 3.4% over the past month to $1.63 per kilogram. Following a 3.3% decline, the cash price of Chinese aluminum reached $1,935 per metric ton. A 3.2% drop on the LME left the primary aluminum cash price at $1,593 per metric ton.
The price of Chinese aluminum bar fell 3.1% to $2,065 per metric ton. At $1,951 per metric ton, Chinese aluminum billet was down 2.7% for the month. Last month, European 1050 aluminum prices dropped by 0.4% to $2,853 per metric ton. The price of European 5083 plate drifted 0.4% lower to $3,009 per metric ton.
The price of Korean 1050 aluminum sheet rose 6.2% to $2.97 per kilogram after falling the previous month.
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.