Aluminum MMI: Falling Chinese Prices Offset by Strong Prices in ROW

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The Aluminum Monthly Metals Index (MMI) held steady at 86 this month based on mixed price movements. While prices in China dropped in the 1% to 2% range, all other prices in the Aluminum MMI basket rose slightly.

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LME aluminum prices continued to fall into June, but recovered toward the end of the month. LME prices are currently moving sideways at around $1,800/mt, with the present price slightly higher at $1,807/mt.

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets

Due to lower LME prices, a recent forecast for Indian production projects a slowdown in output growth. Domestic production costs increased by around 25% during the past three to five years, putting break-even costs above the current LME price, which was at $1,777/mt in late June.

According to Reuters, Japanese aluminum premiums increased 3% to $108/ton for Q3 due to tighter aluminum supplies in Asia. Japanese producers initially sought increases to the $115-$120 per ton range. Weakness in the semiconductors market and trade worries capped gains.

Chinese Aluminum Prices

SHFE aluminum prices weakened during the past month, reversing the upward trend evident since around February 2019. Demand appears seasonally weaker at this time; therefore, market observers will want to watch prices carefully during the next month or two to see if the downtrend continues.

Source: MetalMiner analysis of Fastmarkets

In a normal cycle, prices might rise again as China moves away from seasonally hot and rainy weather.

According to a recent Reuters report, China’s aluminum production increased by 2.4% in May compared with May 2018 because of smelter restarts in response to higher prices, which could also contribute to the recent weakness.

Price weakness appears to be temporary. If prices do not increase, this will indicate a weaker-than-expected Chinese economy and/or that output continues to increase, with increased supply capping price gains.

Increased Aluminum Use on the Horizon Across Sectors

Aluminum prices may also receive future support from innovations beyond just the automotive sector, based on the metal’s flexibility and lightweight profile.

The Indian government announced that railway coach cars will transition to aluminum, while older conventional stock will begin a phaseout.

Coca-Cola announced its AQUAFINA® water brand will see an aluminum can package in U.S. food service outlets. The announcement comes as part of the company’s greater move to reduce the use of plastic packaging.

U.S. Aluminum Premiums

The U.S. Midwest Premium finally dropped, but only slightly, to $0.18/lb. With aluminum prices rising in most countries, supply tightness may continue to support the premium. The U.S. Midwest Premium still remains stubbornly high since the the U.S. removed its aluminum tariffs on Canadian and Mexican aluminum in May.

What This Means for Industrial Buyers

Price signals were mixed this month, with weaker Chinese prices contrasting with higher prices in the rest of the world. Global production increased, but not enough to offset overall tightness in terms of supply.

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Actual Metal Prices and Trends

Chinese prices dropped again this month, in the range of 1-2%. The Chinese primary cash price dropped 1.6% to $2,013/mt, while Chinese aluminum scrap fell 1.7% to $1,835/mt. Billet and bar prices dropped by 1.6% and 1.5%, respectively, to $2,080/mt and $2,177/mt.

This month, European prices increased. European commercial 1050 sheet increased by 2.3% to $2,553/mt, while the 5083 plate price increased by 2% to $3,011/mt.

Korean commercial 1050 sheet, 5052 coil premium over 1050, and 1050 all increased by around 2% to $3.1, $3.14 and $3.27 per kilogram, respectively.

India’s primary cash price increased 1% to $2.09 per kilogram.

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The LME primary 3-month aluminum price held essentially flat, increasing 0.28% increase to $1,794/mt.

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