Aluminum MMI: Index near three-year low; demand remains constrained

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The Aluminum Monthly Metals Index (MMI) held relatively flat this month, with a one-point increase to 83, as the majority of prices in the index showed mild increases.

LME aluminum prices generally moved sideways during November and were unable to generate strong upward price momentum due to slower recent economic growth rates and uncertainty over demand in early 2020.

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

While prices have not gained as much value recently — even compared to early November highs — prices have not dropped as low either.

During the past month, prices dropped back below the $1,800/mt level after trading above that level during the first week or so of November, but still found support firmly above the $1,700/mt level.

Overall macroeconomic conditions continued to restrain price increases.

SHFE aluminum prices continue sideways

SHFE aluminum prices continued to move firmly sideways during the past month.

Source: MetalMiner analysis of Fastmarkets

Since March, prices traded in a firm band between CNY 13,500/mt and CNY 14,500/mt.

The sideways trend looks set to continue. However, prices recently hit some progressive lows, (although the drops look mild):

Source: MetalMiner analysis of Fastmarkets

Aluminum production in China will most likely continue to grow much faster than demand, according to a webinar by analysts at Shanghai Metals Market (SMM).

In 2020, China’s output of primary aluminum looks set to increase by 2.5% to 36.44 million metric tons (after contracting by 1.51% this year).

This year, capacity totaled around 40.69 million tons, with actual production of around 35.1 million tons on an annualized basis.

Aluminum consumption in China will increase by 0.3% next year to 36.19 million metric tons, after declining by 1.48% this year.

Increased use of aluminum in autos will not be enough to absorb China’s rising production

According to a report prepared for the International Aluminum Institute on long-term automotive use in China earlier this year, aluminum demand for use specifically within the sector in China will increase from an estimated 3.8 million tons in 2018 to 10.7 million tons by 2030, based on a compound annual growth rate of 8.9%.

Let’s put that in perspective.

This past October, Chinese production totaled just around 3.0 million tons.

High production levels likely to constrain price increases into early 2020

Surplus production could continue to weigh on prices next year, resulting in a price drop below $1,700/mt, particularly early in the year.

Once prices drop further, the rate of smelter closures will likely increase, thus relieving downward price pressure.

However, at this time prices continue to trade near break-even levels, likely delaying announcements of production closures into Q1 2020.

What this means for industrial buyers

Aluminum price momentum remained stalled overall this month, with most index prices holding sideways or making only mild gains.

A return of price momentum cannot be ruled out for Q1 2020, especially if both the automotive and manufacturing sectors see a strong global recovery.

Buying organizations interested in tracking industrial metals prices with ease, including embedded forecasting, will want to request a demo of the MetalMiner Insights platform.

Buying organizations seeking more insight into longer-term aluminum price trends may want to read MetalMiner’s Annual Metal Buying Outlook.

Free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook

Actual metal prices and trends

This month, China aluminum scrap prices increased once again, rising by 2.4% to $1,849/mt. Chinese aluminum primary cash prices also increased again, by 1% to $1,994/mt. Chinese aluminum billet and bar prices saw increases of around 0.4%, to $2,049/mt and $2,144/mt, respectively.

Korean prices dropped back this month by around 3%. Korean commercial 1050 sheet came in at $2.95/kilogram. The 5052 coil premium over 1050 was $3.12/kilogram and the 3003 coil premium over 1050 was $2.92/kilogram.

The LME primary three-month price increased by 0.8% to $1,761/mt.

European commercial 1050 sheet and 5083 plate both increased mildly again this month, by 0.3% and 0.9%, respectively, to $2,482/mt and $2,862/mt.

India’s primary cash price increased by 0.5% to $1.87 per kilogram. 

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