After last month’s drop, the Aluminum MMI (Monthly Metals Index) index increased by three points. The current Aluminum MMI index reads 98 points, 3.2% higher than the December reading. 

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In December, MetalMiner anticipated a rise in aluminum prices … and that is exactly what happened.

Aluminum prices increased by 10.6% in December, reaching a more than two-year high.

Source: MetalMiner analysis of FastMarkets

Trading volumes appear strong and accompany the current uptrend. Moreover, aluminum’s latest peak has climbed over previous ones, signaling strength in its latest market rally. Other macroeconomic indicators, such as a weaker U.S. dollar and a stronger CRB index driven by higher oil prices, may continue to support aluminum prices.

Moreover, the Department of Commerce’s Section 232 investigation should see a report released mid-January, which will also impact prices. The U.S. Department of Commerce announced a new self-initiated anti-dumping and countervailing duty investigation on imports of Chinese common aluminum alloy sheet at the end of November. The U.S. has launched several anti-dumping campaigns for aluminum products this past year.

Crude Oil

As oil prices serve as a critical part of the CRB index, together with other base metals, buying organizations need to monitor oil price trends.

Moreover, there are some base metals, such as aluminum, that are strongly influenced by oil prices.

Crude Oil prices. Source: MetalMiner analysis of Trading Economics

Oil prices have increased again this month. Current oil prices remain above our bullish level signal, meaning that we could  expect some more upward movement for oil.

Similarly, increasing oil prices will continue to provide support to base metals prices.

Aluminum Scrap

Chinese aluminum scrap prices increased sharply this month and appear in a long-term uptrend since 2016.

The latest rally in both LME and SHFE aluminum prices also results in a jump in aluminum scrap prices. Chinese scrap prices increased by 4.9% this month.

Source: MetalMiner data from MetalMiner IndX(™)

What This Means for Industrial Buyers

Aluminum prices jumped sharply again this month. After sharp price increases, base metal prices sometimes pull back to digest the previous gains. Aluminum prices may lack some price momentum this month, although that continues signaling bullishness for the light metal.

Therefore, adapting the “right” buying strategy becomes crucial to reduce risks by knowing when to buy.

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Actual Aluminum Prices and Trends

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Windsor/Adobe Stock

The Copper MMI (Monthly Metals Index) jumped five points to 88, driven by skyrocketing LME copper prices. LME copper prices increased by 6.4% in December.

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LME copper prices are back again over the $7,000/metric ton level. Moreover, copper prices breached a previous peak, signaling strength in the rally. Trading volume also remains heavy, supporting the uptrend.

Source: MetalMiner analysis of Fast Markets

Despite skyrocketing in December, copper prices fell slightly during the first few days of January. However, that does not signal any weakness for the rally yet, as prices increased for the entire previous month. Therefore, copper prices may take a little breather this month to digest previous gains.

The U.S. Dollar

Copper and the U.S. dollar have a negative correlation. This means when the the U.S. dollar appears high, copper prices tend to trade lower.

Right now, we see just the opposite.

The U.S. dollar. Source: MetalMiner analysis of Trading Economics

Some analysts believed that the U.S. dollar had turned the corner and had started to recover. Despite the Fed rate hike in December, the U.S. dollar has continued to fall. The U.S. dollar has also seen heavy selling volume, which suggests more weakness.

Typically, the U.S. dollar trades lower when commodities and base metals trade higher. Copper (Dr. if you will) tells us much about commodities because the dollar has such a great influence on its price (direction).

Therefore, buying organizations will want to follow U.S. dollar price trends closely.

Copper Scrap vs. LME Copper

The price divergence between copper scrap and LME remains wider than historical spreads; though, this month, both moved in tandem.

Chinese copper scrap prices increased by 5.76% this month, compared to the 6.4% jump in LME prices.

Although these two don’t increase by the same amount, they tend to follow a similar trend. Data from both reflects a clear uptrend that appears sustainable, at least for the short term.

Source: MetalMiner data from MetalMiner IndX(™)

What This Means for Industrial Buyers

During December, buying organizations had opportunities to buy some volume. The relevance of the price jumps increases when the U.S. dollar shows weaknesses and all the base metals show strength.

Therefore, as copper prices remain bullish, buying organizations may want to “buy on the dips.”  For those who want to understand how to reduce risks, take a free trial now to MetalMiner Monthly Outlook.

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Actual Copper Prices and Trends

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