Aluminum MMI: Demand uncertainty weighs on aluminum prices

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Aluminum production
Alexander Chudaev/Adobe Stock

The Aluminum Monthly Metals Index (MMI) reversed last month’s three-point increase with a three-point decline back to 83.

LME aluminum price dynamics switched late in January, with a precipitous drop setting prices down to a new short-term low.

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

Prior to the coronavirus black swan event originating in Wuhan, China, price gains looked somewhat capped at around $1,840/mt, but they at least moved sideways around the $1,800/mt price level.

If prices trend sideways from here — now closer to $1,700/mt — more production curtailments could be expected.

[MetalMiner’s monthly buying outlook reports give you pricing and specific buying strategies for 10 metal types, including aluminum. Request your trial now.]

SHFE aluminum prices still hold sideways, despite a late January price decline

Despite overall weaker industrial metals prices as January came to a close, SHFE aluminum prices managed to hold above longer-term support.

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

Lower raw material costs offset lower aluminum prices for Hydro during Q4 2019

According to Norsk Hydro’s Q4 2019 reporting, recently detailed by MetalMiner’s Fouad Egbaria, weaker aluminum demand recently created headwinds for company operations. However, lower raw material costs helped offset lower aluminum prices.

Global demand growth in 2020 will range from 0% to 2%, with production exceeding demand by 500,000 to 1 million tons, according to Hydro’s projections.

JW Aluminum to close St. Louis production facility in May 2020

U.S. producer JW Aluminum, which focuses on aluminum roll products, announced the pending closure of its St. Louis production facility, scheduled for May 30.

The company noted that when it acquired the operation in 2004, imports from China constituted less than 1% of the U.S. foil market; now, Chinese imports of aluminum foil constitute around 25% of the market.

According to a statement by CEO Lee McCarter, tariffs and duties have not been enough to overcome the effects of unfair Chinese competitive practices.

As noted by MetalMiner’s Stuart Burns recently, Chinese exports of aluminum semis have repressed global aluminum prices for five years or more.

However, despite weak global prices, several major producers recently restarted or added capacity, such as Aluminium Bahrain (Alba) and Rusal, in addition to China’s Yunnan Aluminum Co Ltd, as detailed in January’s Aluminum MMI report.

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Additionally, Burns notes aluminum prices will continue to trend lower in the short term due to weak short-term demand in China, as the country grapples with production constraints due to coronavirus concerns. In the longer term, higher capacity levels could weigh on prices.

What this means for industrial buyers

Recent price gains reversed this month. However, if declines prove to have been overreactive, low prices may not hold for long.

Buying organizations interested in tracking aluminum prices — with embedded forecasting — with ease will want to request a demo of the MetalMiner Insights platform.

Actual metal prices and trends

This month’s index values generally weakened.

Primary aluminum prices dropped most, with the LME primary three-month price falling by 5.4% month over month to $1,725/mt as of Feb. 1.

Chinese aluminum primary cash prices dropped by 5.6% to $1,972/mt. Chinese aluminum billet dropped by 1.6%, to $2,123/mt, and bar by 1.5% to $2,220/mt.

Chinese aluminum scrap prices increased for the fourth month in a row, rising by 0.4% to $1,932/mt.

Korean prices dropped in the range of 3% to 4%.

European commercial 1050 sheet and 5083 plate both decreased this month, in the range of 1% to 2%.

India’s primary cash price remained at $1.93 per kilogram.

Did you know that MetalMiner’s Monthly Outlook report series — created specifically for industrial buying organizations — provides you with pricing and specific buying strategies for 10 metal types, including aluminum? Request your free trial today.

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