Aluminum MMI: Skyrocketing Prices Power Six-Point Surge

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The May Aluminum Monthly Metals Index (MMI) increased six points. Skyrocketing LME aluminum prices drove the subindex value increase. The current Aluminum MMI subindex stands at 100 points, 6.4% higher than in April.

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LME aluminum price momentum recovered strongly in April. LME aluminum prices reached a more than seven-year high.

Source: MetalMiner analysis of FastMarkets

LME aluminum prices fell slightly at the end of the month. However, this movement appears as a price correction from previous highs. LME aluminum prices increased again at the beginning of May, showing a strong uptrend.

The Reasons for Aluminum Volatility

LME aluminum price volatility came as a result of U.S. sanctions levied April 6 on Russian companies and their owners.

Russia is the world’s second-largest aluminum producer (accounting for 6% of world production). Therefore, the sanctions created the alarm of supply shortages in the U.S., along with all international markets outside China.

However, the U.S.Treasury Department delayed the first due date for the sanctions until Oct. 23, at which point investors must divest or transfer debt and equity and industrial metal buyers must wind down pre-existing long-term contracts.

The delay in the aluminum sanctions eased LME aluminum prices; however, the market has tightened significantly.

SHFE Aluminum

Given the current alarm bell around aluminum and aluminum product shortages outside China, the country may see increased exports, despite U.S. tariffs. Therefore, market observers will want to follow SHFE aluminum prices closely.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese SHFE prices traded similarly to LME prices. However, the degree of the SHFE price increase appears to be less sharp.

Chinese SHFE stocks fell for the first time in nine months (since June 2017) to 970,233 mt, according to exchange data.

U.S. Domestic Aluminum

As a result of the ongoing uncertainty in the aluminum market, U.S. aluminum Midwest premiums increased again to $0.19/pound, climbing to a more than three-year high.

At the end of April, the country-specific aluminum (and steel) tariff exemptions for the E.U., Canada and Mexico were extended until June 1. The decision came  just hours before the temporary exemptions from the tariffs expired.

The final agreements have not yet been released, but the government suggested that quotas will replace tariffs. This action could ease U.S. Midwest premiums.

What This Means for Industrial Buyers

The LME aluminum price retracement in April presented buying organizations with a good opportunity to buy some volume, as prices increased again later in the month.

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Adapting the right buying strategy becomes crucial to reduce risks. Given the ongoing uncertainty around aluminum and aluminum products, buying organizations may want to take a free trial now to our Monthly Metal Buying Outlook.

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