Aluminum Price Index Falls 3.8% As Producers Face Painful Profit Losses

The monthly Aluminum MMI® registered a value of 77 in September, a decrease of 3.8% from 80 in August.

Aluminum_Chart_September-2015_FNLThe 3-month London Metal Exchange aluminum price fell as low as $1,506/mt, the lowest level in more than 6 years as the continuous sell-off in Chinese shares is raising worries about a slump in aluminum demand from the world’s largest aluminum consumer.

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The latest trade data provided more negative news from China for the commodity sector, showing that China’s industrial slowdown is sharpening. Weaker demand from overseas buyers helped to further aggravate the trade slide in August.

Production Correction

Aluminum production in China fell 1.3% in July from a record in June, showing that the lowest prices in 6 years are forcing some smelters to cut output. Chinese smelters proposed to cut the less cost-efficient plants and delay the opening of new facilities. These cuts will take time to help aluminum prices as Chinese smelters already ramped up output this year with new lower-cost capacity.

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Like with other base metals, the low prices are hurting aluminum producers who are now facing one of the most painful periods in years. Century Aluminum Co. said in August that it would begin cutting production in October, blaming low aluminum prices caused by low-priced Chinese exports. The company’s stock price is down an astonishing 80% on the year to date.

What This Means For Metal Buyers

Like with other base metals, low prices will eventually cause producers to shut down capacity. However, with a bearish commodity environment, a strong dollar and weak global demand, it is hard to tell when prices will make a comeback. We could see more price declines before we see the bottom of this commodity market cycle.

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The price of European 1050 aluminum closed the month at $2,687 per metric ton after dropping 8.0%. After falling 5.3%, Korean 1050 aluminum sheet finished the month at $2.78 per kilogram. Korean 3003 coil premium over 1050 sheet prices dropped by 5.2% this month to $2.82 per kilogram. At $2.95 per kilogram, Korean 5052 coil premium over 1050 sheet was down 5.0% for the month. A 3.7% drop on the LME left the aluminum 3-month price at $1,564 per metric ton. A 3.1% drop over the past month left Chinese aluminum billet at $1,841 per metric ton. On the LME, the primary aluminum cash price decreased by 2.7% this month, ending at $1,550 per metric ton. European 5083 plate fell 2.7% to $2,996 per metric ton. At $1,770 per metric ton, Chinese aluminum scrap was down 2.6% for the month. At $1,838 per metric ton, the Chinese aluminum cash price was down 2.5%. Chinese aluminum bar prices decreased by 2.3% this month, ending at $1,965 per metric ton.

The cash price of primary Indian aluminum rose a slight 2.2% over the past month to $1.61 per kilogram.

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.

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