Aluminum MMI: Rising aluminum prices concern Beijing

The Aluminum Monthly Metals Index (MMI) increased by 4.1% for this month’s reading.
September 2021 Aluminum MMI chart
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LME three-month aluminum prices are only $100/mt away from 2011 prices.
Overall, LME aluminum traded up despite some volatility in August.
Prices took their largest dip Aug. 16-19 before recovering. During the same period, LME trading volumes got heavier, marking a negative trend.
However, volumes got even heavier as the price increased. This ultimately signals that the market remains bullish.
Chinese prices also climbed this month. SHFE volumes — along with prices — picked up heavily toward the end of the month, consistent with a strong bullish trend.

Beijing wary of rising aluminum prices

Rising aluminum prices have become a concern for China.
Bloomberg reported that the China Nonferrous Metals Association believes the steep increase of the aluminum price is not supported by fundamentals and substitutions could emerge.
Record high prices have already deterred the manufacturing sector in China.
China’s Caixin Index has dropped since June. In August, the index dropped below the 50 level, meaning factory activity is contracting.
On Sept. 1, China released its third batch of metals from state reserves. The move is an attempt to control prices and prevent commodities inflation from hurting economic growth. However, the release did not dent prices.

The National Food and Strategic Reserves Administration said 70,000 tons of aluminum, 50,000 tons of zinc and 30,000 tons of copper were sold. So far, a total of 270,000 tons of the three metals has been released.

China output cuts

Despite China’s attempts to control aluminum prices, within other base metals, Antaike reported China shut down approximately 2.33 million metric tons of aluminum capacity from January through August 2021.
Several Chinese regions imposed restrictions on electricity consumption and metal production in aluminum refineries in recent months due to tight power supplies and pressure to reduce emissions. Antaike reported the restrictions could expand to other regions.

European prices

For the first time ever, this month European mills have introduced Rotterdam delivery premiums into their pricing. However, the premium is not being applied consistently.
Some mills are applying it as a duty-paid or duty-unpaid. Meanwhile, some are applying it at the time of order placement, a month ahead of delivery or a month ahead of production.
This month, the 6082 plate price reached £4,040/mt ($5,573/mt). Meanwhile, 5083 plate reached £3,790/mt ($5,228/mt), with 1050 sheet price at £3,110/mt ($4,290/mt) and 6082 bar at £3,060/mt ($4,221/mt).

LME launches new digital register

On Aug. 31, the LME launched a centralized digital register, LMEpassport, that stores electronic Certificates of Analysis (CoA) and sustainability credentials for LME-listed aluminum.
While the main usage of the LMEpassport is to access the CoA, it allows users to disclose metal’s sustainability characteristics on a voluntary basis.
The LMEpassport will be phased out for all metals that require a CoA. However, the LME will roll it out first for aluminum Oct. 1, 2021.

Actual metals prices and trends

The LME three-month aluminum increased by 1.7% month over month to $2,665 per metric ton as of Sept. 1.
Chinese primary cash aluminum jumped by 7.1% to $3,286 per metric ton. Chinese aluminum scrap remained the same at $2,059 per metric ton. Meanwhile, Chinese aluminum billet went up by 7.0% to $3,278 per metric ton.
European 1050 aluminum sheet increased by 13.0% to $4,290 per metric ton.
Indian primary cash rose by 4.6% to $2.90 per kilogram.
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