aluminum price

Aluminum firm Alcoa Corporation reported its second-quarter earnings Wednesday, with some numbers showing the impact of current market trends and forces.

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The Pittsburgh-based firm reported $3.6 billion in Q2 revenue and $904 in adjusted earnings before interest, tax, depreciation and amortization (EBITDA). The firm’s Q2 EBITDA marked a 34% increase from Q1’s $653 million.

“Higher alumina and aluminum prices, as well as a stronger U.S. dollar, were the primary factors driving this sequential increase,” Alcoa’s Q2 earnings report states. “Somewhat offsetting these factors were unfavorable mix and higher costs for energy, raw materials, and maintenance activities.”

However, the firm downgraded its annual EBITDA forecast from $3.5 billion and $3.7 billion down to between $3.0 billion and $3.2 billion “due to current market prices and other factors.”

“Market pricing continued to be favorable in the second quarter and drove a 38 percent sequential increase in adjusted EBITDA excluding special items,” Alcoa President and CEO Roy Harvey said. “These market tailwinds also facilitated greater progress on our strategic priorities to reduce complexity in our Company, drive returns from our assets, and address pension liabilities to strengthen the balance sheet for the long-term.”

The firm attributed the lower forecast to “current market prices, tariffs on imported aluminum, increased energy costs, and some operational impacts.”

“While markets and trade dynamics are likely to remain fluid, we will continue to be focused on driving value for our stockholders through all market cycles,” Harvey added.

On the operations side, Alcoa reported that the third potline at its Warrick Operations in India will be restarted by the end of the year. Two of three potlines were restarted, and the third line due for a restart was shut down in May due to a power outage.

Alcoa estimates the restart of the third potline during the second half of the year to cost an estimated $5 million. In addition, once the partial restart schedule is completed at Warrick, the company estimates the smelter’s annual operating capacity will be 161,000 metric tons.

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Alcoa closed Wednesday at $47.96/share on the New York Stock Exchange. The stock’s 52-week high came on April 18 ($62.35), buoyed by the then still relatively new Section 232 tariff on aluminum (and steel).

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The U.S. and India are scheduled to sit across the table this week in Geneva to discuss the case filed by India with the World Trade Organization’s (WTO) dispute settlement mechanism over the U.S.’s imposition of import duties on steel and aluminum.

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The talks will be held under the aegis of WTO’s dispute settlement mechanism, according to a news report by the Press Trust of India.

India is part of the group of nations — which includes China, Russia and Norway, among others — to have filed separate dispute claims on the topic with the WTO. The meeting is part of the consultations the U.S. will be holding with all such countries on July 19-20.

It may be recalled that the U.S. had imposed a 25% tariff on steel and a 10% tariff on aluminum imports from India. India’s exports of the two commodities to the U.S. stands at about U.S. $1.5 billion per annum. India had initially tried to raise the issue with the U.S., and then informally with the WTO, calling the move an “abuse of global trade provisions that could spiral into a trade war,” — sentiments similar to the one expressed by India’s neighbor, China.

In May, India dragged the U.S. to the WTO dispute settlement mechanism over the imposition of import duties.

Consultation is the first step of the dispute settlement process. Incidentally, both the countries are already involved in disputes at the global trade body in the areas of poultry, solar, and export subsidies, to name a few.

According to another news report, senior trade officials of India and the U.S. will meet later this month in Washington to conclude negotiations on a “mutually-acceptable trade package.” Quoting an unnamed official source, it said the meeting comes amid an escalation of the global trade war.

Since India’s proposed additional tariff worth U.S. $235 million on 29 U.S. goods — including almonds and apples — are retaliatory in nature, any rollback of the additional duty on Indian steel and aluminum by the U.S. will lead to a withdrawal of corresponding taxes by the Indian Government on U.S. goods, too.

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The U.S. sees good prospects for its companies in the Indian civil aviation, oil and gas, education service, and agriculture segments.

It was another busy month in the world of metals.

Then again, these days quiet months in metals or in trade, generally, are few and far between.

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Trade tensions continued to rise, as $34 billion in tariffs on Chinese goods went into effect (China responded in kind), and an additional $16 billion in tariffs are under review. This week, President Donald Trump announced the intention to impose an additional $200 billion in tariffs on China, ratcheting up the stakes even further.

Meanwhile, a Section 232 investigation focusing on imports of automobiles and automotive components is unfolding. More than 2,300 public comments were submitted as part of the U.S. Department of Commerce’s review process, and public hearings are scheduled for next week.

Meanwhile, in metals markets, most base metals were down last month, with steel being the exception.

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A few highlights from this month’s round of Monthly Metal Index (MMI) reports:

  • Since peaking at $7,316/mt in June, the LME copper price dropped 12%.
  • The subindex for grain-oriented electrical steel was the only MMI to post an increase on the month.
  • The U.S. silver price hit its lowest level since January 2017, while U.S. gold bullion dropped to a one-year low.
  • Aluminum prices were also part of the general downtrend, as prices continued to move away from this year’s April peak (after Russian companies and their owners, including aluminum giant Rusal, were slapped with sanctions by the U.S.).

Read about all of the above and much more by downloading the July MMI report below.

The July Aluminum Monthly Metals Index (MMI) fell six points, falling to April 2018 levels. The Aluminum MMI now stands at 95 points.

Buying Aluminum in 2018? Download MetalMiner’s free annual price outlook

LME aluminum prices fell in June and have continued to slide so far in July.

However, the rate of the declines has slowed.

Price changes do not appear sharp and selling trading volume remains weak. The price decrease looks like a retracement after the peak in April due to Russian sanctions.

Source: MetalMiner analysis of FastMarkets

LME aluminum prices have fallen toward December 2017 and April 2018 lows. These levels served  as a support to aluminum prices both times, and could cause aluminum prices to bounce back after reaching support.

Global Aluminum

At least for the short term, it appears as though trade policies will impact the global aluminum market.

After the U.S. tariffs on steel and aluminum in March, plus additional sanctions on Russia, aluminum now waits for its next cue.

Canada announced punitive measures on C$16.6 billion ($12.63 billion) worth of American goods in response to U.S. tariffs. The measures will stand until Washington changes the current aluminum and steel tariffs on Canada. Europe also responded to the U.S., approving provisional measures.

Russia became the seventh complainant to ask for a consultation with WTO members against the U.S. duties on steel and aluminum. China, India, the E.U., Canada, Mexico and Norway previously filed similar complaints.

SHFE Aluminum

Chinese SHFE aluminum prices decreased slightly in June, following the LME aluminum trend.

The slide appears less sharp than for LME aluminum prices, but still follows the main short-term downtrend.

Source: MetalMiner analysis of FastMarkets

U.S. Domestic Aluminum

As a result of ongoing uncertainty in the aluminum market, U.S. Midwest aluminum premiums have skyrocketed this year.

July’s premiums, however, have held flat since last month at $0.20/pound. Current levels remain  at more than four-year highs.

Source: MetalMiner data from MetalMiner IndX(™)

What This Means for Industrial Buyers

Despite the recent downtrend, the LME aluminum price trend suggests a continuation of the bull market that started last year.

Tariffs, sanctions and the latest tariff non-exemptions to Canada, Mexico and the E.U. may add support to rising prices, both for LME aluminum and the U.S. Midwest premium. Adapting the right buying strategy becomes crucial to reducing risks.

Buying organizations that want to start doing so now may want to take a free trial now to our Monthly Metal Buying Outlook.

Want to see an Aluminum Price forecast? Take a free trial!

Actual Aluminum Prices and Trends

The Aluminum MMI basket generally fell this month. LME aluminum prices decreased this month by 5.51%, with a closing price in June of $2,160/mt.

Meanwhile, Korean Commercial 1050 sheet fell by 1.38%. Chinese aluminum primary cash prices decreased by 7.21%, while Chinese aluminum bar just fell 5.22%. Chinese aluminum billet prices also decreased 5.30% this month, down to $2,323/mt.

The Indian primary cash price fell by 7.36% to $2.14/kilogram.

China could be said to be making hay while the sun shines.

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A report in AluminiumInsider quotes China’s General Administration of Customs, saying the country’s total exports last month came to 485,000 metric tons, accounting for the second-highest total in the administration’s record-keeping history.

May’s output beat April’s total of 451,000 metric tons by 7.5% and bested May shipments a year earlier of 430,000 metric tons (a 12.8% increase). Only December 2014 had been higher at 542,700 metric tons.

But suggestions that this is the start of a flood may be premature.

Read more

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This morning in metal news, steel and aluminum exports from China were up in May; the National Retail Federation CEO panned the U.S.’s tariffs; and a White House economic analysis reportedly concludes President Trump’s tariffs will hurt economic growth.

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Exports on the Rise

Despite rising trade tensions, including Section 232 tariffs on steel and aluminum, China’s export totals of steel and aluminum were both up in May, according to Reuters.

Chinese aluminum exports were at their highest level in 3 1/2 years, according to the report.

NRF CEO Criticizes Tariffs

Matthew Shay, president and CEO of the National Retail Federation, was critical of the Trump administration’s trade agenda vis-a-vis tariffs, CNBC reported.

Shay, who spoke positively about the president’s December tax cut, argued the tariffs are counterproductive.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

“It makes no sense to go down this road when we have all this momentum,” Shay told CNBC.

White House Economic Analysis Bearish on Tariffs

According to a report by The New York Times, a White House economic analysis of the impact of Trump’s tariffs concludes they will hurt economic growth.

The June Aluminum Monthly Metals Index (MMI) increased one point. The current Aluminum MMI index now stands at 101 points.

Buying Aluminum in 2018? Download MetalMiner’s free annual price outlook

LME aluminum prices showed strength in May, and are continuing to increase this month.

Aluminum has led the base metals complex due to U.S. tariffs and sanctions. These actions, in turn, create all sorts of ripple effects that impact global supply.

Source: MetalMiner analysis of FastMarkets

LME aluminum prices have reached 2012 levels. The base metal began its long-term uptrend in early 2016. Buying organizations need to identify buying dips to avoid costs and mitigate aluminum price risk.

Global Aluminum Industry

U.S. sanctions on some Russian aluminum companies raised concerns regarding global aluminum supply.

The sanctions increased volatility and moved LME aluminum prices to $2,716/mt (maximum value reached during a trading day). Sanctions eased, as the time frame moved out to October. Prices retraced, but remain high.

Other countries suspended aluminum buys from Russian companies, to supply aluminum products to the U.S. As an example, Japan’s UACJ Corporation, a major manufacturer of rolled aluminum products, suspended all of its aluminum purchases from Russia’s Rusal. The company claimed it found alternative supplies, but has not declared the sources.

Aluminum smelters have scheduled restarts, taking advantage of higher LME aluminum prices and supply concerns.

A Rio Tinto aluminum smelter in New Zealand will expand output this year after securing a new energy deal. The restart will take around six months, and will add 85 tons of daily production. This results in a 9% increase of annual output. Aluminum products will include aluminum ingot, billet and rolling block. Alumina comes from Australian refineries, and around 90% of the production in this region goes toward exports.

SHFE Aluminum

Last month, MetalMiner reported a possible increase in aluminum and aluminum product Chinese exports due to the shortages outside China.

Semi-finished Chinese aluminum exports increased by 20.5% in Q1 2018 and, if they maintain this pace, could hit a record. Therefore, SHFE aluminum prices may see some price increases in the short term.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese SHFE prices rose by 4.8% in May. The increase appears higher than LME aluminum prices, but still follows the main long-term uptrend. SHFE aluminum prices have also increased this month.

U.S. Domestic Aluminum

As a result of the ongoing uncertainty in the aluminum market, U.S. aluminum Midwest Premiums increased again in June to $0.20/pound, climbing to a more than four-year high. Last month, the U.S. Midwest Premium fell for the first time since November 2017.

Source: MetalMiner data from MetalMiner IndX(™)

What This Means for Industrial Buyers

LME aluminum price trends suggest a continuation of the bull market that started last year.

Tariffs, sanctions and the latest tariff non-exemptions to Canada, Mexico and the E.U. add support to increasing prices, both for LME aluminum and the U.S. Midwest Premium.

Adapting the right buying strategy becomes crucial to reducing risks. Buying organizations that want to start doing so now may want to take a free trial to our Monthly Metal Buying Outlook.

Want to see an Aluminum Price forecast? Take a free trial!

Actual Aluminum Prices and Trends

The Aluminum MMI basket generally increased this month.

LME aluminum prices rose this month by 2.7%, with a closing price in May of $2,286/mt. Meanwhile, Korean Commercial 1050 sheet increased by 3.72%.

Chinese aluminum primary cash prices fell by 0.7%, while China aluminum bar remained flat. Chinese aluminum billet prices also traded flat this month, at $2,453/mt.

The Indian primary cash price rose by 1.76% to $2.31/kilogram.

The May Aluminum Monthly Metals Index (MMI) increased six points. Skyrocketing LME aluminum prices drove the subindex value increase. The current Aluminum MMI subindex stands at 100 points, 6.4% higher than in April.

Buying Aluminum in 2018? Download MetalMiner’s free annual price outlook

LME aluminum price momentum recovered strongly in April. LME aluminum prices reached a more than seven-year high.

Source: MetalMiner analysis of FastMarkets

LME aluminum prices fell slightly at the end of the month. However, this movement appears as a price correction from previous highs. LME aluminum prices increased again at the beginning of May, showing a strong uptrend.

The Reasons for Aluminum Volatility

LME aluminum price volatility came as a result of U.S. sanctions levied April 6 on Russian companies and their owners.

Russia is the world’s second-largest aluminum producer (accounting for 6% of world production). Therefore, the sanctions created the alarm of supply shortages in the U.S., along with all international markets outside China.

However, the U.S.Treasury Department delayed the first due date for the sanctions until Oct. 23, at which point investors must divest or transfer debt and equity and industrial metal buyers must wind down pre-existing long-term contracts.

The delay in the aluminum sanctions eased LME aluminum prices; however, the market has tightened significantly.

SHFE Aluminum

Given the current alarm bell around aluminum and aluminum product shortages outside China, the country may see increased exports, despite U.S. tariffs. Therefore, market observers will want to follow SHFE aluminum prices closely.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese SHFE prices traded similarly to LME prices. However, the degree of the SHFE price increase appears to be less sharp.

Chinese SHFE stocks fell for the first time in nine months (since June 2017) to 970,233 mt, according to exchange data.

U.S. Domestic Aluminum

As a result of the ongoing uncertainty in the aluminum market, U.S. aluminum Midwest premiums increased again to $0.19/pound, climbing to a more than three-year high.

At the end of April, the country-specific aluminum (and steel) tariff exemptions for the E.U., Canada and Mexico were extended until June 1. The decision came  just hours before the temporary exemptions from the tariffs expired.

The final agreements have not yet been released, but the government suggested that quotas will replace tariffs. This action could ease U.S. Midwest premiums.

What This Means for Industrial Buyers

The LME aluminum price retracement in April presented buying organizations with a good opportunity to buy some volume, as prices increased again later in the month.

Want to see an Aluminum Price forecast? Take a free trial!

Adapting the right buying strategy becomes crucial to reduce risks. Given the ongoing uncertainty around aluminum and aluminum products, buying organizations may want to take a free trial now to our Monthly Metal Buying Outlook.

Numerous factors weigh heavily on the base metals and commodity complex: the Chinese copper scrap ban, the Section 232 proclamation on aluminum and steel combined with country-specific exemptions set to expire on May 1, the Section 301 investigation, and multiple strikes at copper and nickel mines to boot. After the turmoil of the first few months of 2018, MetalMiner reviews how base metals and commodities performed during Q1.

Aluminum, copper and nickel on the rise

Aluminum, copper and nickel prices started 2018 weaker than at the end of 2017. The end of 2017 showed a sharp rally for these base metals, following the bullish uptrend that began in the summer of 2017.

Need buying strategies for aluminum? Try two free months of MetalMiner’s Outlook

The short-term downtrend sounded alarms as prices dropped significantly, not finding a floor. However, LME prices started to climb at the beginning of April, leaving the downtrend behind.

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As my colleague Sydney Lazarus reported yesterday, even though the European Union has a temporary exemption from the U.S.’s Section 232 tariffs on steel and aluminum, it is demanding compensation at the World Trade Organization as shown in a filing by that trade body two days ago, according to Reuters.

The EU is arguing that the U.S. tariffs were imposed only to protect U.S. industry, rather than for security measures.

MetalMiner Executive Editor Lisa Reisman took readers through how the U.S. Department of Commerce did its homework on the Section 232 steel investigation, in a top-read post originally published Feb. 23, 2018. Read the full text of Lisa’s article below.

By now most MetalMiner steel producers and steel buying organizations have pored over the Section 232 steel report published by the Department of Commerce. In case you missed it, here is a link to the full report.

At its core, the Section 232 investigations represent the only public policy solution put forward by any major government to address the fundamental crisis involving extensive and pervasive global overcapacity for steel, stainless steel and aluminum.

Section 232 buying strategies – download MetalMiner’s Section 232 Investigation Impact Report today!

This overcapacity, the Department of Commerce believes, threatens U.S. national security interests because unfairly traded imports have caused substantial financial harm to U.S. producers.

Before you scream “protectionism!”, read on.

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