Aluminum MMI: Aluminum Prices Fall Despite Global Supply Deficit

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The May Aluminum Monthly Metals Index (MMI) held flat at 88 for the third month running, with gains in Chinese aluminum prices negated by weak LME prices.

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LME aluminum prices trended downward throughout April, down to recent January 2019 lows. However, prices seemed to find support again around $1,800/mt in the early days of May.

Source: MetalMiner analysis of FastMarkets

The price basically retraced back to January lows, losing all of the gains made during 2019.

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SHFE Aluminum

SHFE aluminum prices continued to increase, with a higher per ton price of around $2,100/mt.

Source: MetalMiner analysis of Fastmarkets

Based on the most recent production figures from the International Aluminum Institute, although March production levels in China increased by 10% over February 2019, Chinese production levels when compared with March 2018 only increased by 1%. During Q1 in total, Chinese production registered at 8.9 million mt, versus 8.8 million mt the year prior — a 1.6% increase over 2018.

Supply Concerns Fade, but Deficit Anticipated in 2019

With global demand for aluminum outpacing supply, the LME price decline could be a temporary weakness.

Aluminum has been caught up in the general negative pricing momentum industrial metals saw during the past few weeks, as the dollar showed strength. As the dollar strengthens, metal prices tend to weaken. However, if demand conditions deteriorate, the price declines could stick, or the price could continue to move sideways on weakened demand.

According to Alcoa’s most recent quarterly report, a global aluminum deficit of aluminum in the range of 1.5 million mt to 1.9 million mt is estimated for 2019. However, the company estimate was revised down from the range of 1.7 million mt to 2.1 million mt given in the company’s prior quarterly report. This indicates the company anticipates some moderation of global growth, with its estimates revised down to the 2-3% range from 3-4%, stating lower demand growth in China, particularly lower transportation and electrical sector demand.

Midwest Aluminum Premium

The U.S. Midwest Premium continued to hold at the historic high of $0.19/pound during April.

What This Means for Industrial Buyers

LME aluminum prices weakened along with other base metals prices last month, showing downward momentum; prices remain within range of a sideways trend. Prices could hold, then continue to rise further once more or move lower from here depending on overall supply and demand factors at large. It’s also possible the sideways pricing band will continue to hold on weakened demand. Even in a sideways market, it’s important to watch the market carefully for buying opportunities in order to buy on dips.

For more specific pricing guidance related to aluminum and aluminum products, buying organizations may want to request a free trial now to our Monthly Metal Buying Outlook.

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Actual Metal Prices and Trends

Chinese aluminum prices led the index this month, with increases in the range of 2.7% to 2.8%.

The LME primary 3-month price declined by 5% (the biggest decrease in the aluminum basket).

European and Korean prices also declined, but more mildly (in the range of around 1%).

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