The Aluminum Monthly Metals Index (MMI) increased by nearly 6.7% for this month’s MMI reading.
Aluminum prices continue to recover
The aluminum market has recovered quickly, with SHFE prices reaching as high as CNY 14,650/mt on July 10, surpassing the 2020 peak of CNY 14,375/mt (reached Jan. 17).
The SHFE prices recovered 30% over the last three months.
Meanwhile, LME prices are recovering but not as quickly.
In the past three months, the prices went up by 16% from its April low. Last Friday, the price reached $1,694/mt, which is still 8.45% below the 2020 peak of $1,835/mt (reached Jan. 6).
This might seem unusual considering LME stocks have increased from 1,148,750 tons at the end of March to 1,642,600 tons at the end of June. However, the positive sentiment toward a quick economic recovery continues to support prices.
The finance trades seem to reflect this sentiment. The LME reported 159,575 canceled warrants at the end of April and reported 286,325 by July 10, suggesting there is more demand for physical aluminum and deliveries.
Unclear standards for scrap in China
In January of this year, China’s State Administration for Market Regulation (SAMR) published new standards to reclassify high-grade scrap as a resource instead of solid waste.
The custom code to define high-grade scrap should have been published before the new system took effect July 1. However, the SAMR has not published the code yet, which has caused some confusion in the market.
To mitigate the scrap shortage, China’s Ministry of Ecology and Environment has been approving import quotas for solid waste at least until the end of 2020. According to estimates by Reuters, the total approved import quotas for the year so far is approximately 693,659 tons of aluminum scrap.
MSCI against North American tariffs
The Trump administration was worried about a surge in aluminum exports from Canada and Mexico as the United States-Mexico-Canada Agreement (USMCA) came into effect July 1. They considered the reinstatement of the Section 232 penalties; President Donald Trump reportedly asked Prime Minister Trudeau to impose quotas to reduce exports from Canada to the United States.
In response, Bob Weidner, president and CEO of the Metals Service Center Institute (MSCI), wrote to Trump and Trudeau, asking that neither impose aluminum penalties nor protections. Weidner argued North American trading partners should be exempt, as this relationship benefits the North American economy.
Trudeau also pointed out that the U.S. does not produce enough aluminum domestically to fulfill its manufacturing needs. The tariffs will only translate into increasing manufacturing costs, which hurts the U.S. economy.
Ultimately, the U.S. and Canadian trade agencies hope this policy will help reduce global excess capacity and balance the market.
Actual metals prices and trends
The Chinese aluminum scrap price rose 3.4% month over month to $1,825.24/mt as of July 1. LME primary three-month aluminum rose 5.5% to $1,621.50/mt.
Korean commercial 1050 aluminum sheet fell 3.1% to $2.69/kg, while its European equivalent rose 10.6% to $2,328.79/mt.
Chinese aluminum billet rose 3.4% to $2,013.42/mt. Chinese aluminum bar rose 3.3% to $2,108.22/mt.
Chinese primary cash aluminum rose 7.4% to $2,038.89/mt. Indian primary cash aluminum increased 4.6% to $1.83/kg.
[Editor’s Note: This article was updated July 13 to include an updated headline, an updated aluminum price section and a new section on Chinese scrap.]