aluminum price

Last week, the U.S. International Trade Commission (ITC) voted to continue the AD and CVD investigations into common alloy aluminum sheet from China — a decision met with favor by some and concern by others within domestic industry.

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Unlike most such cases, the Department of Commerce self-initated the investigations, marking the first time it had done so since 1991.

Heidi Brock, president and CEO of the Aluminum Association, lauded the decision to continue the investigations.

“The Aluminum Association and its members are encouraged by today’s unanimous preliminary finding by the U.S. International Trade Commission that imports of common alloy aluminum sheet from China are a cause of injury to the domestic industry and their workers,” Brock said in a release. “U.S. companies that make common alloy aluminum sheet have suffered extensive injury thanks to unfairly traded imports from China for many years. Our members are participating in the trade cases initiated by the Department of Commerce to return fair pricing to the U.S. market, and to allow the U.S. industry to make needed investments to further strengthen its competitiveness.”

Not everyone is happy about the decision, however.

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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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Wondering why aluminum prices have pulled back from highs of $2,200 per metric ton on the LME?

After all the hype about environmentally driven smelter closures in China this year and the additional curtailments to be forced on the market in certain provinces during the winter heating seasons, most were expecting the run up in prices to hold steady (at least during the winter period).

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In practice, although prices have made impressive gains from lows of $1,700 per ton earlier this year to five-year highs of over $2,200 per metric ton, it was largely on the pretext of constrained primary metal supply that it is beginning to become apparent is not happening.

According to China’s National Bureau of Statistics (admittedly not the most reliable of sources) Reuters reports China’s aluminum smelters churned out 2.35 million metric tons of the metal in November, down 7.8% from 2.55 million tons in October and down 16.8% from a year ago.

In reality, while headline smelter capacity has been closed, new planned capacity has continued to quietly come onstream.

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The Aluminum MMI dropped four points this month, falling to 95. The drop came on the back of lower LME aluminum prices for November. Aluminum prices decreased by 5.6% during this month.

MetalMiner expected this retracement because aluminum prices rallied since August, and broke our own resistance levels (upper price ceiling). When prices pull back, buying organizations can buy on the dips. Despite November’s price declines, the early days of December show price increases.

Source: MetalMiner analysis of FastMarkets

SHFE aluminum spot prices also decreased in November. The SHFE tends to follow LME trends. We could see the SHFE spot prices increase at any time.

Source: MetalMiner analysis of FastMarkets

Both LME and SHFE prices have traded sideways since the rally back in August, holding above the $1,970/mt level. Trading volumes still signal upward momentum, so buying organizations need to consider their longer-term buying strategies.

Macro-economics also support aluminum prices. November saw a higher CRB index (which we will cover in depth in an article tomorrow), driven by skyrocketing oil prices as well as other raw materials such as iron ore and alumina. Aluminum faces significant raw material price pressure. Generally, increasing raw material and gasoline prices result in aluminum price increases.

Gasoline prices. Source: MetalMiner analysis of Stockcharts.

MetalMiner previously reported that the Commerce Department announced a new self-initiated antidumping and countervailing duty investigation on imports of Chinese common aluminum alloy sheet at the end of November. The estimated dumping margin is in the range of 56.54% to 59.72% for Chinese imports.

Low-Carbon-Footprint Aluminum

Low-carbon aluminum is becoming more popular among carmakers. Low-carbon aluminum differs from traditional alloys by the way it is produced — using hydropower instead of high-emission fossil fuels. Low-carbon aluminum can cut emissions by half by changing the way aluminum is produced (averaging around eight tons of carbon dioxide in Europe and the U.S.). But producing and buying low-carbon aluminum is not free. Aluminum smelters will charge “green premiums” for the newest trend in aluminum. Will buying organizations be paying this new premium?

Aluminum Scrap

Another trend aluminum smelters have deployed involves using aluminum scrap instead of raw materials. Recycled aluminum requires only 5% of the energy used for the complete process. Recycled aluminum includes up to 75% of aluminum scrap, but cannot be used in every industry. The auto industry, for example, requires higher-quality aluminum.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese aluminum scrap prices increased and appear in a long-term uptrend since 2016. However, the latest drop in LME and SHFE aluminum prices also results in a drop in aluminum scrap prices. Chinese scrap prices decreased this month by 9.5%.

What This Means for Industrial Buyers

Despite aluminum prices dropping this month, aluminum remains bullish. Therefore, adapting the “right” buying strategy becomes crucial to reduce risks by knowing when to buy. Oil and gasoline prices have breached their sideways trend and have supported aluminum prices.

Actual Aluminum Prices and Trends

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Pavel Ignatov/Adobe Stock

This morning in metals news, raw steel production in the U.S. jumped last week, Century Aluminum was down 10.8% on Monday and nickel prices are aided by steel on Tuesday.

U.S. Raw Steel Production Up 9.7%

Raw steel production was up 9.7% year-over-year for the week ending Nov. 18, according to weekly data from the American Iron and Steel Institute (AISI).

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Domestic raw steel production was 1,745,000 net tons while the capability utilization rate was 74.9%. Production for the week ending Nov. 18 was up 0.3% from the previous week, when production was 1,739,000 net tons and the rate of capability utilization was 74.6%.

Century Aluminum Has a Down Monday

Shares of Century Aluminum closed 10.8% lower on Monday, according to an AP report on Madison.com.

The question is, why?

“Market pundits aren’t entirely certain what to make of this development, noting that aluminum stocks may simply have been shifting away from expensive LME warehouses to cheaper warehouses and other countries,” the report states.

Nickel Prices Get a Boost

Steel-dependent nickel got a boost Tuesday, when prices in the Shanghai and London markets saw a jump, Reuters reported.

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The most-traded nickel contract on the Shanghai Futures Exchange was up 1.3% at 94,710 yuan ($14,285) a ton by 0126 GMT, according to Reuters. Meanwhile, three-month LME nickel rose to $11,677 per ton.

Yes, the aluminum price has fallen back this month.

Yes, it is looking decidedly weak compared to its high point of $2,215 per metric ton earlier this month.

Yes, inventory on the Shanghai Futures Exchange (SHFE) is building rapidly, hitting a record high this week of 666,581 tons, according to Reuters.

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That’s not where we expected aluminum to be back in the summer when the market was talking all about smelter closures in China this winter and supply constraints.

Does that mean the market thinks the constraints are not going to happen? Is this another case of Beijing talking up their policies but failing to enforce them?

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The Aluminum MMI increased two points this month, reaching 99 points.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Stronger LME and Chinese primary cash prices led to the jump. This month’s index reading brings the highest MMI reading of any index since January 2012, when MetalMiner launched the MMI series of indexes.

Source: MetalMiner analysis of FastMarkets

Upward price momentum may have slowed slightly, but the bullish run appears sustainable. We could expect additional upward movements.

The U.S. Department of Commerce imposed preliminary duties against aluminum foil imports from China. These duties range from 96.81-162.24% and apply to all aluminum foil products from China. The Chinese government requested consultation with the World Trade Organization (WTO) on  Nov. 3, claiming that the U.S. is using an expired 2001 clause.

China’s Ministry of Commerce said on Tuesday: “Regrettably, the United States has ignored the expiration of Article 15 … and still persists in its erroneous practice of continuing to use the ‘third country’ method in its anti-dumping investigations on imported products of China in violation of its obligation to WTO rules.”

Of course, China does not have market economy status, so the Department of Commerce will likely not agree with China’s Ministry of Commerce.

Oil, Gasoline Prices

Oil prices have already jumped in November, moving above levels that signal a bull market to MetalMiner. Oil prices hit a two-year high and currently trade over $55/barrel. The latest uptrend reveals strength in the latest oil rally.

Source: MetalMiner analysis of StockCharts

Since oil prices serve as one of the most important contributors to the CRB (commodities) index, we expect continuous upward movements for the index. Therefore, the case for a bullish commodity  — and industrial metals market, too — appears to have strengthened despite the latest short-uptrend of the U.S. dollar (dollars and commodities tend to move inversely).

Gasoline prices also increased with oil prices. MetalMiner previously analyzed the correlation between gasoline prices (and oil prices) and increasing base metal prices, specifically aluminum. When oil (and gasoline) prices increase, aluminum prices tend to follow. The degree of the increases does not always correlate, but aluminum prices tend to move together with the commodity.

Source: MetalMiner analysis of StockCharts

What This Means for Industrial Buyers

Aluminum showed resilience this month, maintaining its trend in the bullish market. Increasing oil prices also support the bullish case for aluminum. Therefore, adapting the right buying strategy becomes crucial for reducing risks.

MetalMiner released its longer-term annual outlook back in October. Readers can grab a free copy here.

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Actual Aluminum Prices and Trends

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stockquest/Adobe Stock

For three months, MetalMiner has claimed a sideways trend for aluminum. This sideways trend could both signal a market top or a price consolidation, and a continuation pattern of the bullish market that started last year.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The price increase in aluminum has coincided  with heavy trading volume, signaling a breakout of a price consolidation. Thus, we could see a bullish uptrend for aluminum, which means increasing aluminum prices.

Source: MetalMiner analysis of FastMarkets

As previously explained by MetalMiner, buying in a bullish market means buying organizations will want to identify opportunities to buy forward (hedge).

This new price increase, together with other strength in LME base metals (such as copper), may be the start of a new uptrend for aluminum.

The U.S. dollar has also continued to show weaknesses this year, providing a lift to base-metal prices. The CRB index is still in a long-term downtrend, but has shown a slight recovery in the short-term trend. The DBB index is currently in an uptrend, both for the long- and short-term.

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Buying organizations may want to buy forward given aluminum price dynamics, together with trading volume.

For more insight into forward buys and hedging, subscribe to our Monthly Metal Buying Outlooks.

Goldman Sachs has set pretty optimistic forecasts on aluminum prices. According to a recent report from CNBC, the bank expects prices to hit $2,000 per metric ton in six months and $2,100 per ton within a year.

3M LME aluminum. Source: fastmarkets.com

I’ve also been pretty bullish on aluminum since last year. Similar to what we saw in the steel industry, China put cutting aluminum capacity on the top of its agenda as the country takes air pollution seriously. In addition to supply cuts promises, China’s economic numbers were running strong at that time. However, just recently, our commodity outlook is moving from bullish to bearish, and being bullish on aluminum while commodity markets weaken is a very hard sell. Here are some reasons why Goldman Sachs might need to adjust its aluminum outlook.

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Aluminum Output Up

Goldman expects aluminum to be the next target of supply-side reform in China. The bank expects aluminum to be the new steel this year. Sentiment in steel markets got a boost on Beijing’s announcements to cut steel capacity. But as time goes on, markets are starting to realize that capacity cuts don’t mean lower output, at least in China.

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AdobeStock/Pavel Losevsky

Beijing’s focus on supply-side reforms of China’s giant aluminum industry has been a prime mover for the metal price this year.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

But primary metal price rises aside, of more concern to aluminum consumers should be the nature and extent of China’s aluminum semi-finished product exports. There have been various facets to China’s product exports, as Andy Home of Reuters succinctly explained in an article last week.

On the one hand, the growing volume of product exports has ignited considerable trade tensions with the U.S. and Europe. In the case of the former, the article reports, it led to a formal complaint to the World Trade Organization (WTO) and, more recently, a Section 232(b) investigation under the Trump administration. In Europe, expiring duties have been rolled over on imports of aluminum wheels from China and further action sought by trade bodies on a range of aluminum products.

Meanwhile, rumours that an indeterminate but significant proportion of China’s semi-finished product exports were in fact primary metal being illegally classified as semi-finished product to circumvent export duties on unwrought aluminum have at least partially been vindicated, as a focus has been brought to bear on a massive stock of aluminum held in Mexico last year that appeared to originate from Vietnam but with links to China.

Home explained that China’s exports of commodity code 7604 (bars rods and extruded profiles) have mushroomed from just over 6,000 tons in 2012/2013 to 463,000 tons in 2015 and 510,000 tons in 2016. Some of that metal appeared in Mexico last year before media attention encouraged the metal to be recycled back to an obscure port in Vietnam. Read more