Just as aluminum appeared to gain some momentum, prices failed to gain traction this month. Aluminum gave up most of April’s gains in May. The Aluminum MMI fell 3.75%.
Non-China supply has declined. The latest figures from the International Aluminium Institute (IAI) showed the lowest collective annualized run-rate level outside of China since August 2015. But what about production in China? It’s still hard to tell, especially when recent statistics coming out of China are even more unreliable than normal, showing swings of millions of metric tons from month to month.
China exported 400,000 mt of unwrought aluminum in April. This represents a year-over-year decline of 7.8%, supporting the argument that domestic demand has picked up there thanks to the stimulus effect. However, how robust and for how long that uptick is likely to last is extremely difficult to tell.
Overall, we cannot blame aluminum for the losses in May. The price decline was mainly caused by a stronger dollar and reversed expectations of China’s stimulus being sustainable. The Bloomberg Commodity Index, which tracks returns from 22 raw materials, climbed 0.7% to 87.31 last week. A close above 87.45 would mark a 20% advance. The recovery in oil prices is biggest factor.
Yet, aluminum still corrected this month despite oil’s price surge.
What This Means for Metal Buyers
The sustainability of aluminum prices will still depend on cuts in Chinese aluminum production and on how much China can inflate aluminum demand through further stimulus measures. Both factors remain quite uncertain at the moment. Therefore, the shy rally in aluminum prices this year could extend but, at the same time, it looks vulnerable.
Actual Aluminum Prices
The primary three-month LME aluminum price fell from $1,646 per metric ton in May to $1,558.50/mt this month, a fall of 5.3%. Chinese aluminum billet fell to $1,899.58/mt this month from $1,905.68 in May, a drop of .3%.