Our Aluminum MMI finished the month flat.
Aluminum prices rallied into August but they failed to breach $1,700 per metric ton for the third time this year. Aluminum is up 7% this year but unlike other industrial metals, prices haven’t really made that much progress. With the ongoing debate of whether aluminum markets will be in deficit or surplus this year, investors seem hesitant to chase prices much higher.
China’s Exports Fall
Aluminum’s fundamentals look much better than at the beginning of the year, especially when we look at the supply side which has always been the biggest concern for the markets over the past few years. The biggest challenge for the aluminum industry was Chinese exports and they have started to come down.
China exported 390,000 mt of unwrought aluminum in July, down 9.3% from July of last year. Chinese aluminum exports have fallen around 7% for the first seven months of 2016. Lower aluminum exports are supporting aluminum prices this year.
Chinese Aluminum Production Falls
According to data released by the International Aluminum Institute, China’s aluminum production declined 2.4% in July compared to the same month last year. For the first seven months, production in China has fallen by 3.1%.
This is the first time the markets have witnessed a fall in China’s aluminum production since 2010. This fall in production is good news for aluminum bulls, which see a market headed for deficit in 2016. However, there is also the other side of the coin…
Fears of Rising Production
Fears of rising Chinese aluminum production in the second half seem to be putting pressure on aluminum prices, limiting any price rally. Whether markets are in a deficit or a surplus this year depends on China’s production. While producers such as Alcoa projecting a record deficit for 2016, Goldman Sachs sees a record surplus in the year.
Actual Aluminum Prices
- Chinese aluminum scrap finished the month at $1,707 per metric ton, down 1% from last month.
- Chinese aluminum billet also fell 1% to $1,869 per mt.
- Korean 1050 aluminum finished flat at $2.96 per kilogram.
- The LME aluminum primary 3-month contract also ended the month flat at $1,642 per mt