Alexander Chudaev/Adobe Stock
The Aluminum Monthly Metals Index (MMI) bounced off last month’s three-year low with a three-point increase to 86. All prices in the index increased by more than 3%.
LME aluminum prices increased in December and surpassed $1,830/mt in early January.
Now analysts are watching to see if lackluster demand will allow recent increases to stick.
SHFE aluminum prices hold sideways
SHFE aluminum prices continued to move firmly sideways during the past month, still moving below the CNY 14,500/mt price level.
While recent lows remained somewhat higher during December, price highs have not yet exceeded September’s levels. However, SHFE prices did not drop as far back as LME prices over the course of the year, with annual lows for 2019 occurring in January.
Analysts do not anticipate a significant uptick in demand until after the Lunar New Year. This year, the holiday commences fairly early (on Jan. 25).
Based on flat demand growth, reflected in the failure of prices to push above the critical CNY 14,500/mt price level and due to new capacity developments, SHFE aluminum prices look set to continue moving sideways (at least for now).
Yunnan hydro-powered smelter to add nearly 1 million tons in capacity by end of 2020
Although production contracted in China in 2019, production looks set to increase once more in 2020 due to new capacity, plus restored capacity following temporary production declines due to heavy flooding during 2019.
The Henan Shenhuo smelter, located in Yunnan province, commenced new production Dec. 31, according to press reports.
While this first-phase launch represents 450,000 tons in capacity, total capacity of 900,000 tons per year will be ready by the end of 2020. The smelter uses hydropower for production.
Weak demand led to production curtailments in 2019
Based on data available through November 2019 from the International Aluminum Institute, aluminum production dropped significantly in South America and western Europe (by 8.3% and 7.9%, respectively).
Production levels in China decreased by around 2%, with 32.68 million tons produced during the first 11 months of 2019.
North American production increased by 1.2% to 3.49 million tons produced during the first 11 months of 2019.
Total global production dropped by around 1.1% to 58.19 million tons during the first 11 months of 2019, compared with the same period of 2018.
Producers announce closures, capacity reviews due to poor market conditions
On Dec. 10, Rio Tinto announced a strategic review of its New Zealand Aluminum Smelter (NZAS), which is located in Tiwai Point and has a 350,000-ton annual capacity.
The company anticipates a lack of profitability for the operation due to current market conditions and high energy costs. The assessment, which could result in either curtailment or closure, will be completed during Q1 2020.
Slovalco, located in Slovakia and majority-owned by Norsk Hydro, will curtail primary aluminum production by 20% due to the weak market environment (pending final approval at Slovalco’s general meeting), according to a news release from Hydro. The site has an annual capacity of 175,000 tons of primary aluminum; curtailments are expected to start in January.
What this means for industrial buyers
Prices gained recently, bouncing off of three-year lows. However, unless clearer signs of recovered demand emerge, recent price increases could evaporate following the completion of early Q1 2020 restocking activities.
Buying organizations interested in tracking aluminum prices with embedded forecasting will want to request a demo of the MetalMiner Insights platform.
Buying organizations seeking monthly insight into aluminum price trends may want to learn more about the MMO (MetalMiner Monthly Buying Outlook).
Actual metals prices and trends
All values in the index increased by greater than 3% this month.
Chinese aluminum scrap prices increased for the third month in a row, rising by 4% month over month to $1,924/mt as of Jan. 1. Chinese aluminum primary cash prices also increased for a third straight month, increasing by 4.7% to $2,088/mt.
Chinese aluminum billet and bar prices increased for a second consecutive month following mild increases last month. Billet increased by 5.3% to $2,158/mt, while bar rose by 5.1% to $2,255/mt.
Korean prices increased this month, reversing declines from last month. Korean commercial 1050 sheet came in at $3.05/kilogram, up by 3.4%. Meanwhile, the 5052 coil premium over 1050 increased 3.5% to $3.22/kilogram and 3003 coil premium over 1050 increased 3.3% to $3.09/kilogram.
The LME primary three-month price increased by 3.5% to $1,822/mt.
European commercial 1050 sheet and 5083 plate increased again this month, rising by 3.5% and 3.3%, respectively, to $2,570/mt and $2,958/mt.
India’s primary cash price increased by 3.2% to $1.93 per kilogram.