aluminum price

As the World Bureau of Metal Statistics (WBMS) will tell you, the global aluminum market reached a surplus of 1,603 kt in the January to September 2020 period.

That tripled the surplus of 480 kt recorded for the whole of 2019.

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Global aluminum market sees rising production

Production continued to rise in China. In addition, production made a strong comeback in North America, where it rose 4.3% year over year, according to Capital Economics, largely due to the recovery of Alcoa’s Becancour smelter in Canada.

Chinese output grew 3.8% to nearly 31 million tons in the January to October period. Even so, demand still outstripped supply. The country imported some 766 kt of primary metal, according to Reuters.

Despite Chinese demand — or maybe because of it — an estimated 3.2-million-ton global surplus will build this year, according to CRU estimates. Some 2.9 million tons of that tonnage will occur outside of China.

Aluminum stocks and demand

Yet if ever there was an example of how exchange stocks are no indication of demand, LME inventory levels actually fell this year (down by 53 kt so far).

Surplus production has a way of disappearing off the radar in the aluminum market. The stock and finance trade soaks up excess production and profitably stores it away on the back of a strong LME forward price curve.

The portion that is visible via the LME’s off-warrant reporting structure doubled from 730 kt in February to 1.56 million tons by September. That figured has continued to climb since.

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As we noted yesterday, aluminum prices have continued to rise — this in spite of increasing global aluminum production.

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Global aluminum production rises 3.5%

According to the latest data from the International Aluminum Institute, global aluminum production rose 3.5% in October from the previous month.

October output reached 5.59 million metric tons, up from 5.40 million metric tons in September.

Global aluminum production rose 4.5% year over year from 5.35 million metric tons in October 2019.

China output chugs along

Meanwhile, aluminum production in China totaled an estimated 3.23 million metric tons in October, up from 3.13 million metric tons the previous month.

Furthermore, China’s production reached 2.98 million metric tons in October 2019.

Despite gains in output, the aluminum price has continued to rise. Since the LME three-month price’s April trough, aluminum is up 37%.

As MetalMiner’s Stuart Burns explained last week, China’s metals demand has supported prices this year, even as other economies are not quite as far along in their respective economic recoveries.

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aluminum price

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This morning in metals news: the LME three-month aluminum price has continued to rise in the leadup to the Thanksgiving holiday; Rio Tinto signed a new agreement to strengthen its partnership with China’s Tsinghua University; and, lastly, New York state is one of the U.S. leaders in renewable energy generation.

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LME three-month aluminum prices gains

Like other metals, the LME three-month aluminum price has showed significant upward momentum this year.

The LME-three month aluminum price closed last week at $1,995 per metric ton. Aluminum is up 8.22% from the previous month.

Furthermore, since its April trough, the price has increased 37%.

Rio Tinto strengthens partnership with Tsinghua University

Miner Rio Tinto announced it is strengthening its partnership with China’s Tsinghua University.

The firm said it is committing an additional 30 million yuan ($4.5 million) over the next five years to support research projects at the Tsinghua-Rio Tinto Joint Research Centre for Resources, Energy and Sustainable Development.

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This month the Aluminum Monthly Metals Index (MMI) rose by 3.5%, as the aluminum price made gains in October.

November 2020 Aluminum MMI chart

Are you prepared for your annual aluminum contract negotiations? Be sure to check out our five best practices

Aluminum prices and demand increase

The LME aluminum price reached a 17-month high on Oct. 16 at $1,863.50/mt. The price has increased over 27% since its pandemic low of $1,459.50/mt. Prices dropped the last week of October but have since recovered sharply.

The aluminum price continues to rise along with demand.

According to the JP Morgan Global Manufacturing PMI, global manufacturing activity increased to 53.0 in October. The October reading marked the PMI’s best in 29 months. In the the North American market, the U.S. and Canada saw increases in new orders and production, along with Germany.

In Asia, manufacturing rose rapidly in China, India and South Korea.

The recent sharp increase in coronavirus cases — and consequent lockdowns — could be a risk to the improving manufacturing sector, particularly in Europe.

In the manufacturing sector, aluminum is used for construction, packaging and transport.

Strong demand in China

China continues to show signs of strong aluminum demand.

Unwrought aluminum and aluminum product imports remained high at 355,999 metric tons during September despite decreasing compared to 426,469 metric tons in August.

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hot rolled steel

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This morning in metals news: the U.S. steel sector’s capacity utilization rate for the week ended Oct. 31 jumped to 70.4%; Cleveland-Cliffs said the Trump administration will take action under Section 232 vis-a-vis imports of laminations and imported grain-oriented electrical steel (GOES); and, finally, the LME three-month primary aluminum price picked up to start the week.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Steel capacity utilization rises to 70.4%

The U.S. steel sector’s capacity utilization rate continued to make incremental gains last week, according to the American Iron and Steel Institute (AISI).

U.S. steel mills tallied a capacity utilization rate of 70.4% during the week ended Oct. 31, up from 69.7% the previous week.

Production during the week ended Oct. 31 reached 1.56 million net tons, up 1.0% from the previous week. The weekly total, however, marked a 13.7% year-over-year decline.

Cleveland-Cliffs praises Trump administration for Section 232 action

Earlier this year, the Trump administration launched a Section 232 probe covering laminations and wound cores.

On Monday, Cleveland-Cliffs praised the Trump administration, saying it planned to take action using Section 232.

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aluminum price

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This morning in metals news:

  • The aluminum price retraced this week
  • General Iron is building a new metal shredding home in Chicago
  • Finally, the United States Geological Survey (USGS) reported estimates on undiscovered Gulf Coast Basin oil reserves

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Aluminum price falls below $1,800/mt

The LME aluminum price closed Thursday at $1,795 per metric ton.

The price reached a 2020 high earlier in October, touching just over $1,863 per metric ton.

Meanwhile, the LME three-month price reached a 2020 low in early April, reaching around $1,460 per metric ton.

General Iron begins construction on new Chicago home

General Iron has started construction on its new metal shredding home in Chicago, the Chicago Sun-Times reported.

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Aerospace may be down, automotive is coming back, albeit going through immense change from internal combustion engine (ICE) to electric vehicles (EVs), but one sector of the aluminum market that is brewing up a storm is the aluminum can market.

Are you prepared for your annual aluminum contract negotiations? Be sure to check out our five best practices. 

Aluminum can market tightens amid pandemic

The media has been awash with reports for months now that the aluminum can market is really tight. As lockdowns hit this year and bars either closed or saw falling attendance, consumers switched to supermarkets and liquor stores for their soft and beer beverages.

Beer and soda sales have held up well and are actually increasing for some. But where brewers and drinks producers sold volume through hospitality outlets and delivered in kegs, they now have to meet demand in six-packs from supermarket shelves.

The switch to aluminum cans has been unprecedented. “For the most part, the North American can industry is sold out for the next 24-36 months, and we don’t see the supply chain catching up to real demand until 2025-26,” Credit Suisse said in a recent report.

According to SPGlobal, U.S. producer shipments of aluminum can stock for the domestic market in the second quarter rose 5.5% year over year to 912.5 million pounds. Meanwhile, in the first quarter, Aluminum Association data show U.S. imports of aluminum can sheet reached 118.18 million pounds. That figure compares with 71.59 million pounds in Q1 2019 — a 65% jump.

And therein lies the problem.

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This month the Aluminum Monthly Metals Index (MMI) remained flat for this month’s index value, as the SHFE aluminum price and its LME counterpart trended sideways this past month.

October 2020 Aluminum MMI chart

Do you use cost breakdowns in your aluminum negotiations? See other tips in negotiating with mills and service centers

SHFE, LME prices’ behavior

The SHFE aluminum price has traded sideways since mid-July. The price is averaging CNY 14,661/mt over the past three months.

By August, the LME aluminum price started to follow the sideways trend as well, averaging $1,777/mt since then.

However, the SHFE aluminum price continued to move higher than its LME counterpart.

Throughout September, SHFE prices were approximately $370/mt higher than the LME price.

The arbitrage continues to promote imports in China, making it a net importer for a second consecutive month in August. This trade flow indicates large demand for aluminum in the Chinese market, which is well on its way to economic recovery.

The current state of trade raises the question: how much longer can China continue to export semi-finished metal if its cost base is approximately $370/mt over the LME? Are mills selling at a loss (or are they subsidized)?

Tariffs against China

China accounts for approximately 55% of global aluminum production.

Despite it being a net importer for the past few months, China is still a huge exporter of aluminum downstream products. Chinese exports caused other large markets to contemplate restrictions on Chinese aluminum imports.

Currently, India is seeking to develop policies to protect its own domestic production. India’s first measure might require every importer to obtain a license from the government for every shipment. Even though the measure applies to exports from all origins, the Federation of Indian Mineral Industries pointed out most of the country’s imports come from China.

Meanwhile, the European Commission imposed provisional anti-dumping duties on aluminum products from China, with duties reaching as high as 48%. The Commission opened an investigation in February after it suspected China of dumping aluminum extrusions.

The director general of the European Aluminium Association said the duties were not only crucial for the survival of the domestic aluminum market but also for a greener regional economy.

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aluminum price landing page with should-cost price

MetalMiner’s metals price landing pages (aluminum, steel and stainless steel) now feature the LME three-month prices set against MetalMiner’s track record, in addition to “should-cost” prices.

How much should your metals buy cost?

It’s a simple question that doesn’t always have a simple answer — or, at the very least, an answer that’s easy to get.

MetalMiner’s “should-cost” models aim to cut through the confusion and give buyers concrete ideas of what the products they’re buying should be costing them.

The MetalMiner should-cost models cover aluminum, steel and stainless steel.

So, what exactly do the models offer?

Aluminum should-cost model

With respect to aluminum:

  • Comprehensive price breakdowns, including conversion cost for specific grade, thickness and width.
  • In addition, the model is global; buyers can use from multiple regions.
  • Lastly, buying organizations can more effectively “lock” conversion costs.

“Many competitors publish the LME three-month price along with the MW premium,” MetalMiner CEO and Executive Editor Lisa Reisman recently noted. “Few, if any, publish the conversion adder based upon grade, gauge, width etc. The MetalMiner aluminum should-cost model provides a level of granularity not previously available in the marketplace.”

Carbon steel

As for carbon steel, there is currently no North American price index for finished steel inclusive of adders and extras.

In addition, the carbon steel should-cost model includes:

  • Most steel contracts are agreed on the basis of base price, which provides little to no flexibility to negotiate on total price. The steel should-cost model provides a price breakdown for adders/extras, which can generate additional cost savings for steel buyers.
  • The model includes a price breakdown comparison of major U.S. steel mills. Buyers can use the information to negotiate annual sourcing contracts.
  • Furthermore, the model contains a high level of granularity for specific types of steel (examples of specificity can be found on our carbon steel price landing page).

Stainless steel

What about stainless?

Similarly, there is currently no North American price index for stainless. In addition, the MetalMiner stainless should-cost model:

  • Contains a high level of granularity for specific types of stainless. Examples of specificity can be found on our stainless price landing page.
  • Second, the model features comprehensive price breakdowns (base price + gauge/width + finish + surcharge + vinyl + CTL).
  • Lastly, it provides better means of negotiating effectively with suppliers.

For more information about the MetalMiner Insights platform and should-cost models, visit the MetalMiner Insights landing page

The Aluminum Monthly Metals Index (MMI) increased by 2.4% for this month’s MMI value.

September 2020 Aluminum MMI chart

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SHFE, LME arbitrage

LME and SHFE aluminum prices traded sideways this past month.

The LME price reached $1,818/mt on Sept. 1, a level it had not reached since January 2020.

Meanwhile, the SHFE price reached CNY 14,960/mt on Aug. 24. However, the SHFE aluminum prices continued to move higher than the LME price.

Throughout the month, SHFE prices were approximately $360/mt to $415/mt higher than the LME price. Some of the arbitrage has occurred due to the weakening of the U.S. dollar, which makes the Chinese price appear higher.

Chinese imports remain high

The price arbitrage between the LME and the SHFE continues.

China became a net importer for the first time in July. The country imported 440,000 tons in July, according to the General Administration of Customs.

July imports rose by 35.5% from the previous month and by 570% from July 2019.

The arbitrage and increase of aluminum imports in China led to the decline of LME warehouse stocks to 1.55 million tons by the end of the month.

On the other hand, Chinese exports are down 11% from August 2019 (despite a slight increase in August). However, exports reached a four-month high at 395,424 tons. The downtrend is mostly due to weak demand overseas, as most countries are still in the early recovery phases of the coronavirus pandemic, while China seems to be ahead.

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