This week, aluminum prices approached long-term weekly demand zones. These are price levels that typically trigger a strong upswing. Before the most recent short-term declines, prices bounced off these levels, […]
Tag: aluminum price index
After seeing a short-term bullish rebound in July, aluminum prices began to modestly decline again in early August. All in all, the rebound was insufficient to suggest a bullish reversal. […]
Aluminum prices continue to display a macro downtrend. Shorter-term trading ranges are forming but also breaking quickly, signaling further bearish sentiment. Simultaneously, breakouts to the downside seem to indicate a […]
Aluminum prices declined overall in May. However, near the end of the month, they appeared to hit bottom and began to trade sideways. Conflicting macroeconomic and geopolitical factors continue to […]
Many metals consumers normally buy if not spot then on a three-to-six-month time horizon. Still others book up to a year out. Those that fix for longer periods often publish […]
The monthly Aluminum MMI® registered a value of 77 in September, a decrease of 3.8% from 80 in August.
The 3-month London Metal Exchange aluminum price fell as low as $1,506/mt, the lowest level in more than 6 years as the continuous sell-off in Chinese shares is raising worries about a slump in aluminum demand from the world’s largest aluminum consumer.
The latest trade data provided more negative news from China for the commodity sector, showing that China’s industrial slowdown is sharpening. Weaker demand from overseas buyers helped to further aggravate the trade slide in August.
Aluminum production in China fell 1.3% in July from a record in June, showing that the lowest prices in 6 years are forcing some smelters to cut output. Chinese smelters proposed to cut the less cost-efficient plants and delay the opening of new facilities. These cuts will take time to help aluminum prices as Chinese smelters already ramped up output this year with new lower-cost capacity.
Like with other base metals, the low prices are hurting aluminum producers who are now facing one of the most painful periods in years. Century Aluminum Co. said in August that it would begin cutting production in October, blaming low aluminum prices caused by low-priced Chinese exports. The company’s stock price is down an astonishing 80% on the year to date.
What This Means For Metal Buyers
Like with other base metals, low prices will eventually cause producers to shut down capacity. However, with a bearish commodity environment, a strong dollar and weak global demand, it is hard to tell when prices will make a comeback. We could see more price declines before we see the bottom of this commodity market cycle.
Subscribe to see exact prices of all the copper markets we track in the MetalMiner IndX!
The monthly Aluminum MMI® registered a value of 80 in August, a decrease of 3.6% from 83 in July.
The combined impact of stronger output and weaker demand from China are adding to the global aluminum surplus. Chinese exports remain strong (up 35% year-on-year in the first half of the year) and the recent Chinese stock market sell-off has only raised worries about a bigger-than-expected economic slowdown and the latest figures seem to agree with the market.
Purchasing Down Again
China’s July flash Purchasing Managers’ Index came in at 48.2. China’s PMI has been below 50 for five consecutive months. Figures below 50 are generally associated with a fall in manufacturing activity.
Mix all this information together, add a strong dollar and a falling commodity market and there you have it: Aluminum prices hit a fresh six-year low.
With aluminum now nearing $1,600/mt, prices are close to or below the cost of production for a big portion of global capacity. This is hurting the profitability of aluminum producers and investors are well aware of that.
Producers Predicting Surpluses
Alcoa, Inc., recently raised its forecast for the global aluminum surplus, expecting a surplus of 760,000 metric tons this year which is almost double Alcoa’s previous forecast. The aluminum giant managed to offset declines in aluminum prices through its growth in its aerospace, automotive and alumina businesses. However, that hasn’t changed the minds of investors who have contributed to Alcoa’s shares dropping 40% year to date.
What This Means For Aluminum Purchasers
These price declines not only hurt producers, but also the profitability of buying organizations that believe prices can’t go lower and proceed to buy big volumes to meet future demand. It’s never too late to have a strategy – don’t be caught on the wrong side of the trend.
This Month’s Exact Prices and Trends
For those, log in or sign up below:
Weak demand, a flood of Chinese exports and robust Western supply, in spite of earlier smelter closures, have created a perfect storm of surplus in the aluminum market.
Shares of Alcoa Inc. stock have been collapsing over the past few months, falling more than 20% in only 8 weeks.
The aluminum giant, with earnings ahead on Wednesday, has experienced powerful earnings growth over the past four quarters; however, lower aluminum prices are weighing on its stock price.[caption id="attachment_71232" align="aligncenter" width="500"] Alcoa, Inc. (AA) Stock Price 2 years out. Chart: MetalMiner.[/caption]
It should come as no surprise that the monthly Aluminum MMI® registered a value of 83 in July, a decrease of 3.5% from 86 in June.
World aluminum production in May is up almost 12% year-on-year. That is the fastest growth rate since 2011.
LME Price Falling
Aluminum on the London Metal Exchange is back again below $1,700 per metric ton. This level acted as a floor in March 2014 and Alcoa investors are wondering if aluminum prices will rebound again this time, which would give a boost to Alcoa’s shares.
Unfortunately aluminum prices might need to fall further in order to cause further non-Chinese closures to balance the market. Furthermore, the Chinese stock market is having a rough go of it. The Shanghai index is off over 30% from highs reached in June. Finally, the fact that commodity prices keep falling across the board makes a rebound in aluminum prices more unlikely. Aluminum buyers and Alcoa investors might want to think twice before betting on a rebound in prices…
The Aluminum MMI® collects and weights 12 global aluminum price points to provide a unique view into aluminum price trends over a 30-day period. For more information on the Aluminum MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.
Aluminum has had quite a depressing month.
A flood of Chinese exports, weak demand and robust Western supply in spite of earlier smelter closures have all contrived to leave the market in primary surplus. As such, MetalMiner’s monthly Aluminum MMI®, tracking aluminum prices across the globe, registered a value of 86 in June, a decrease of 4.4% from 90 in May.
China’s aluminum output rose to a record 2.59 million tons in April, according to the National Bureau of Statistics. The world simply can’t rely on China to restrain output. Prices might need to fall further in order to cause further non-China closures to balance the market. Rusal cited the rising tide of Chinese aluminum exports as a main concern in the producer’s first-quarter earnings report, which could increase in light of China removing a 15% export tax on aluminum products.
In the absence of demand from the financial sector, both the LME/CME price and physical delivery premiums have been falling, particularly in Asia.
Aluminum Premiums for Physical Delivery: Takin’ a Dive!
As I wrote on the blog recently, Reuters reported this week that premiums have dropped to $100-110 per metric ton for in-warehouse Singapore metal, down from $150 two weeks ago and $400 in December. In South Korea, May tenders were said to be awarded at $135-145 per metric ton and the country is sitting on nearly half a million tons of primary metal inventory. Premiums have dropped in Europe and North America, too, but are said to be stabilizing for the time being, although most are expecting further falls in North America.
Interestingly, the LME has returned to a healthy forward price curve, as it did in times of plenty from 2009-2014 when the stock and finance trade flourished, soaking up excess supply.
With such a strong forward curve and low interest rates, all it needs is a little appetite from the hedge funds and banks, with some encouragement from warehouse companies to store metal, and bingo! Excess inventory rapidly gets sucked up into long-term storage.
According to Reuters, some warehouse companies are starting to offer incentives or discounts on storage costs of around $70 to draw in metal. The foundations are in place for a pick-up in stock and finance activity, and the possibility that “demand” created by that activity could support premiums at least at or around current levels and potentially, at least in Asia, raise them up.
Most are expecting LME prices to fall further; it is entirely possible LME prices could fall while physical delivery premiums could rise. That was exactly the situation we had in 2012-13 and the LME changed its rules to avoid it. The next six months could test the system, let’s see.
What It Means for Semi-Finished Aluminum Markets
The combination of lower LME prices and falling physical delivery premiums have allowed producers of semi-finished products to chase a weak market down, a process hastened by rising supply from China.
Semi-finished product makers’ conversion premiums have also been soft in the face of a well-stocked distribution market and slack end-user demand, a situation that, as we enter the summer period, is unlikely to turn around before the fourth quarter.
Exact Aluminum Price Movements Over the Month
Members sign in to see the detailed price trends.
MetalMiner’s aluminum price index, the monthly Aluminum MMI®, registered a value of 90 in May, a significant increase of 2.3% from 88 in April.
Aluminum on the London Metal Exchange is back above $1,900 per metric ton, breaking short-term resistance to hit a four-month high.
China Ends Export Taxes
China erasing aluminum export taxes didn’t seem to weigh down on prices; however, aluminum premiums took a beating when the news of China’s removal of export taxes came.
As my colleague Stuart Burns wrote in a recent article, the tax removal should reduce the domestic surplus of metal, supporting domestic prices and depressing prices in overseas markets. With current primary production counting for about 75% of total primary capacity, Chinese producers will have the ability to increase production without creating any shortages in China’s domestic market.
Even outside China, production has been ramping up over the past six months. UC Rusal and Alcoa, Inc. have responded by closing older and less-efficient capacity, but even so, both they and other primary producers are investing in new capacity at the same time. Demand for aluminum remains robust, but the excess of supply is something that is clearly bugging aluminum producers.
Certainly, the supply outlook doesn’t explain the recent price increase. However, the recent weakness in the dollar does. The dollar index is experiencing some turbulence for the first time in more than 9 months and that supported aluminum and most industrial metal prices in April.
Battery Research Continues
In other aluminum news this month we also had Stanford University building an aluminum-ion battery prototype that offers various improvements over lithium-ion batteries. These aluminum-ion batteries will potentially make consumer electronics safer, charge faster and allow thinner or even flexible-form factors.
Get all of this month’s exact prices in the full article.