aluminum price

tariffs headline over $100 bills

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Whether the new Biden administration creates a more insightful or sophisticated approach to trade remains to be seen.

But, if nothing else, a new administration is a chance for a reset on policies that have not worked as intended under a previous administration.

Aluminum tariff policy

The previous administration’s Section 232 tariffs on aluminum of 10% were well intentioned. The tariffs aimed to try to reverse the decline in US domestic aluminium smelting capacity.

In recognition of aluminum’s role in defense and aerospace applications, the government viewed the growing level of imports as a threat to national security. As such, creating a barrier to imports intended to allow US smelters to operate profitably and encouraged firms to reopen idled capacity. Furthermore, the hope was that, in time, firms would open new smelters.

The previous decade had been brutal for the US aluminium smelting industry.

By 2017, capacity utilization had fallen to 37%, according to Reuters.

Many hailed the strategy as a savior for the smelting industry. However, consumers would ultimately have to pay the bill.

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Flaws in the plan

But even accepting that the COVID-19 pandemic made 2020 a far from typical year, it has become clear the tariff strategy has not worked on a number of levels.

While the inflationary cost of finished goods has been minor, the aluminum content even of a can of beer is a small fraction of the total product cost. It remains true that consumers have had to foot the bill.

It was always the intention that domestic producers would raise their prices to the import plus tariff price. The corresponding uplift was what was supposed to allow them to operate profitably again, to arrest the decline and reopen idled capacity.

Annualized production rose to 1.15 million tons at the end of 2018 from 750,000 tons a year earlier. The increase, however, proved short-lived. By the end of last year, national annualized production had fallen to 920,000 tons and capacity utilization to about 50%, Reuters reported.

Equally worrying the post states, there has been no new smelting capacity. The United States remains as dependent as ever on imports of primary metal.

Aluminum tariff and Canada

Buyers will remember the spike in prices that followed the reinstatement of tariffs on Canadian aluminium predicated on the “surge in imports,” as the Trump administration claimed at the time.

The reality was Canadian-origin metal had simply made up for the absence of Russian metal following Rusal’s pivot away from the US, largely to Asian markets, following the earlier sanctions on owner Oleg Deripaska. Russian imports collapsed from 725,000 tons in 2017 to only 136,000 tons last year. Shipments from Canada simply filled the gap, rising 10% in 2019.

The previous administration seemed to accept that imports from Canada should not be considered a strategic risk. Ultimately, it removed the tariff in September 2020.

But what of potential suppliers elsewhere? Would it not be of value to the US to widen its non-tariff supply base?

Biden rescinded permission to exempt the UAE recently for what seemed like political rather than national security reasons. China has never exported primary metal, so it remains irrelevant to this policy.

The years ahead

How the US handles imports of semi-finished products going forward will be the topic of a separate post. The US has inherited a fractious trade landscape as a result of the last few years.

It does so at a time of a fundamental re-evaluation of its trade priorities. Many would argue that re-evaluation is long overdue.

That re-evaluation includes its relationship with China. In that vein, the US is better off by working in cooperation with its allies and neighbors than the unilateral policies of the previous administration that have largely failed to deliver benefits.

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list of commodities prices

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Investment banks love a super cycle.

It spurs irrational investment and sucks in unwary investors. Furthermore, it encourages passive funds to up their allocation, even if only by fractions of a percent.

But with some $14 trillion invested in US equities alone, even a modest increase in passive investments into ETFs would reap significant rewards in fees.

As such, it may be not surprising that the big boys — like JP Morgan, as reported in Bloomberg, and Goldman Sachs, as reported in the Financial Times (admittedly focused more on oil) — are calling the start of the next commodities super cycle.

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Commodities super cycle?

On the face of it, they appear to have some foundation.

As a separate post in the Financial Times observes, metals, agricultural and oil commodity indices have risen up to 40% since last July.

In part, this is due to a surge of interest in green-energy projects.

The EU, US and China have all promised to spend big. Hydrogen projects alone could receive €30 billion from the EU.

Copper has rallied to eight-year highs, around $8,375 per ton. The metal is benefiting from strong Chinese demand and the prospects for a more rapid transition to electric vehicles gains momentum. Glencore is quoted as saying world copper demand will double by 2050 and that mine investment is insufficient,

All of that certainly makes for a bullish landscape.

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import tariff

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This morning in metals news: the Coalition of American Metal Manufacturers and Users called on the Biden administration to rescind the Section 232 steel and aluminum tariffs; meanwhile, the Energy Information Administration forecasts US energy-related CO2 emissions to rise after the mid-2030s; and, lastly, US President Joe Biden spoke this week with Chinese President Xi Jinping.

CAMMU urges Biden to ends Section 232 tariffs

The Coalition of American Metal Manufacturers and Users (CAMMU) sent President Joe Biden a letter Wednesday urging him remove the Section 232 tariffs on steel and aluminum.

In 2018, former President Donald Trump imposed the tariffs of 25% for steel and 10% for aluminum.

“By taking action to terminate the Trump tariffs, your Administration can prevent U.S. manufacturers from shutting down production lines, laying off workers, and potentially even closing their doors,” CAMMU said in the letter. “By contrast, the ripple effects of allowing these Section 232 tariffs to remain are substantial. Our member companies report not only record steel prices, but also delivery times stretching 12-16 weeks, causing significant disruptions.”

As we noted previously, however, Biden reversed Trump’s decision to rescind the tariff on aluminum from the UAE (a move he made on his final day in office).

See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your aluminum buy.

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US and UAE flags

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The Aluminum Monthly Metals Index (MMI) increased by 2.1% this month, as LME aluminum prices traded sideways and the US reinstated the Section 232 aluminum tariff on imports from the United Arab Emirates.

February 2021 Aluminum MMI chart

U.S. aluminum reinstates aluminum tariff on UAE

On Feb. 1, President Joe Biden reinstated the 10% aluminum tariff on imports from the United Arab Emirates.

Former President Donald Trump had lifted the aluminum tariff on his last day in office. The reinstated aluminum tariff went into effect Feb. 3.

The reinstatement suggests that it is unlikely the Biden administration will remove the aluminum tariffs imposed by the previous administration. However, as of today, no further decisions were announced on aluminum tariffs.

In addition, Biden’s “Buy American” plans could impact the U.S. domestic aluminum market. The plan will likely promote the manufacturing of essential components in construction, appliances and electronics in the US.

These measures are welcomed at the primary production level. However, not all end-product manufacturers are on board, as they claim these government interventions will artificially inflate the Midwest Premium.

The new administration also announced the delay of the effective date of the Aluminum Import Monitoring and Analysis (AIM) system that the U.S. Department of Commerce created. The Department of Commerce originally said the system would be available Jan. 25. However, it is delaying the launch until March 29. Licenses will not be required for covered aluminum imports until the new effective date.

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High aluminum scrap demand

A Midwest-based trader told Construction & Demolition Recycling that demand for aluminum scrap remains high at secondary smelters that supply the automotive industry in the US

Chad Kripke, an executive vice president of Kripke Enterprise, a nonferrous scrap brokerage firm, confirmed that many sellers are relying on the spot market rather than signing contracts for 2021. This signals that it is a seller’s market.

This market environment is due to the reduced flows of scrap, which has caused spreads to tighten. As a result, secondary producers are opting to purchase scrap at what they might view as high prices rather than risking a lack of material.

New on MetalMiner Insights

This month, MetalMiner added additional U.S. aluminum prices to its Insights platform.

Besides the U.S. Midwest Premium Futures, the platform now includes prices for some of the most common forms of aluminum sheet and coil. It includes prices for: 1100 H14, 3003 H14, 5052 H32, 5083 H321, 6061 T6 and 6061 T651.

Price data goes back to Jan. 1, 2020.

Actual metals prices and trends

The Chinese aluminum scrap price increased 0.4% month over month to $2,067/mt as of Feb. 1. Meanwhile, LME primary three-month aluminum increased 0.4% to $1,988/mt.

Korean commercial 1050 aluminum sheet remained flat at $3.30/kg. However, its European equivalent increased 8.3% to $2,948/mt.

Chinese aluminum billet and aluminum bar rose 0.4% to $2,389/mt and $2,489/mt, respectively.

Chinese primary cash aluminum dropped 2.4% to $2,365/mt. Meanwhile, its Indian counterpart declined 2.2% to $2.24/kg.

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mining

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This morning in metals news: US mines produced approximately $82.3 billion in minerals in 2020; meanwhile, the United States International Trade Commission launched a Section 337 investigation related to batteries; and, lastly, aluminum prices have been dropping.

US mines produced $82.3 billion in minerals in 2020

US mines produced approximately $82.3 billion in minerals last year, the United States Geological Survey (USGS) reported Tuesday.

The totaled marked a decline of $1.5 billion from 2019.

“Decision-makers and leaders in both the private and public sectors rely on the crucial, unbiased statistics and data provided in the Mineral Commodity Summaries to make business decisions and determine national policy,” said Steven M. Fortier, director of the National Minerals Information Center. “Industries—such as steel, aerospace and electronics—that use nonfuel mineral materials created an estimated $3.03 trillion in value-added products in 2020, which represents a 3% decrease from that in 2019.”

The US, however, continues to be heavily import-dependent for many raw and processed minerals. According to the USGS, imports made up more than half of US consumption of 46 nonfuel mineral commodities. Furthermore, the US was totally import-dependent for 17 of those.

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USITC launches Section 337 battery investigation

The USITC announced it had launched a Section 337 probe involving potential patent infringements related to batteries, citing 13 Chinese firms as respondents in the case.

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aluminum ingot stacked for export

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This morning in metals news: the Aluminum Association outlined the issues it hopes the Biden administration will take on; in addition, Alcoa recently reported its Q4 2020 and full-year results; and, finally, the oil price retraced slightly this week.

Aluminum Association: aluminum can be part of ‘American comeback’ story

The Aluminum Association laid out its ambitions and goals for a better U.S. aluminum sector in a series of documents titled “Presidential Policy Brief: Recommendations for a Strong U.S. Aluminum Industry.”

“We congratulate President Biden and look forward to working with him and his team in the coming months and years,” said Tom Dobbins, president and CEO of the Aluminum Association, in a release. “During this challenging time for our nation, it is critically important that we all work together toward renewal and recovery. A strong and growing domestic aluminum industry can play a role in the American comeback story.”

The brief refers to energy, environment, infrastructure, recycling and trade as key areas for aluminum.

“The single biggest threat to U.S. aluminum remains unfairly subsidized overcapacity in China,” the brief states. “Strong, targeted trade enforcement is vital to the U.S. aluminum industry’s ability to compete on a market-based, level playing field. The Aluminum Association supports renewed cooperation with traditional trading partners and allies to address this perennial issue.”

Furthermore, the Aluminum Association cited the need to improve recycling levels from consumer applications.

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bulk cargo iron ore

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This morning in metals news: Rio Tinto’s iron ore shipments rose 2% year over year in Q4 2020; the Energy Information Administration forecast 2021 will see less power generation from natural gas this year; after rising during the first week of 2021, the LME three-month aluminum price has since been sliding.

Rio Tinto reports rise in iron ore shipments

Miner Rio Tinto released its Q4 2020 production results, reporting iron ore shipments rose 2% year over year. Iron ore shipments also jumped 8% compared with the previous quarter.

Meanwhile, iron ore production rose 3% year over year.

The miner’s aluminum production jumped 4% year over year. In addition, bauxite production fell 12% year over year.

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EIA forecasts less power generation from natural gas in 2021

Meanwhile, in energy news, the Energy Information Administration (EIA) forecast power generation from natural gas in the U.S. will decline this year.

The EIA forecast the decline will be about 8% this year.

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copper mine

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This morning in metals news: Turquoise Hill Resources offered an update on the Oyu Tolgoi copper mine expansion project; renewable power generation will continue to rise this year in the U.S.; and the aluminum price has traded sideways over the last month.

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Oyu Tolgoi copper mine project in danger

The fate of the Oyu Tolgoi copper mine expansion project is up in the air, as it could face termination from the Mongolian government.

Turquoise Hill Resources, which is majority-owned by miner Rio Tinto, jointly owns the massive project with the Mongolian government. The parties reached a financing plan for the project in 2015.

However, the Mongolian government appears to be concerned about runaway costs for the project.

“In addition, the Government of Mongolia has advised Rio Tinto that it is dissatisfied with the results of the Definitive Estimate, which was completed and delivered by Rio Tinto and publicly announced by the Company on December 18, 2020, and is concerned that the significant increase in the development costs of the Oyu Tolgoi project has eroded the economic benefits it anticipated to receive therefrom,” Turquoise Hill said in a statement. “The Government of Mongolia has indicated that if the Oyu Tolgoi project is not economically beneficial to the country, it would be necessary to review and evaluate whether it can proceed.”

Renewables continue to rise

Renewable sources account for the most new electricity-generating capacity this year, the Energy Information Administration reported.

“According to the U.S. Energy Information Administration’s (EIA) latest inventory of electricity generators, developers and power plant owners plan for 39.7 gigawatts (GW) of new electricity generating capacity to start commercial operation in 2021,” the EIA reported. “Solar will account for the largest share of new capacity at 39%, followed by wind at 31%. About 3% of the new capacity will come from the new nuclear reactor at the Vogtle power plant in Georgia.”

Aluminum trends flat

After surging throughout most of the second half of 2020, the aluminum price has slowed down of late.

The LME three-month aluminum price is up just 0.22% over the last month. The price closed Friday at $2,032 per metric ton.

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aluminum ingot stacked for export

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This month the Aluminum Monthly Metals Index (MMI) remained flat, as the Department of Commerce announced the creation of a new Aluminum Import Monitoring and Analysis system.

January 2021 Aluminum MMI chart

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New Aluminum Import Monitoring system

On Dec. 23, 2020, the U.S. Department of Commerce announced the creation of the Aluminum Import Monitoring and Analysis (AIM) system.

The system, similar to the Steel Import Monitoring and Analysis (SIMA) system, will collect and publish data on aluminum imports into the U.S.

The system will allow users to track trade flows more easily to help spot trends earlier and to provide better guidance to the domestic industry and government. Likewise, better data collection and its analysis should allow domestic producers to compete on a level playing field.

The system is expected to be available on Jan. 25, 2021.

LME aluminum changes

The London Metal Exchange announced its intention to move forward with its sustainability strategy after receiving market feedback. Part of the strategy will include a spot trading platform for price research and trading of low-carbon aluminum for interested buyers and sellers.

As part of this strategy, the LMEpassport, a digital credential register, will be launched to allow greater visibility of carbon sustainability criteria.

The LME will implement it gradually over three years across its physically settled metals requiring Certificates of Analysis (CoAs) and other value-add information to facilitate disclosure under existing standards across metal brands. The service will start in 2021 and will initially focus on aluminum.

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aluminum ingot stacked for export

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As we continue our review of the best of 2020, let’s take a quick look back at the top aluminum stories of the year.

Previously, we reviewed the most-viewed posts of the year overall and the most-viewed steel-centric posts of the year.

Today, we’ll take a look at aluminum, which has also been on the rise in the second half of the year. The LME three-month price bottomed out at $1,460 per metric ton in April. Since then, however, the price has surged, reaching as high as $2,062 per metric ton in early December.

Like steel, prices have continued to rise. Will that trend continue in 2020? That remains to be seen, of course. However, as MetalMiner’s Stuart Burns outlined in October, Goldman Sachs is bullish on commodities in 2021.

Before we turn the page, let’s first take a look back at the best of 2020.

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Best of 2020: top aluminum posts of the year

  1. Trump expands Section 232 tariffs on steel, aluminum derivatives
  2. Aluminum price is pulled this way and that on rising trader interest, supply glut
  3. Aluminum MMI: Demand weakness leads to further price deterioration
  4. China’s aluminum production continues on through COVID-19 crisis
  5. Aluminum MMI: Demand uncertainty weighs on aluminum prices
  6. Aluminum MMI: Aluminum price makes gains, index rises 6.7%
  7. Aluminum MMI: Aluminum price climbs despite overwhelming supply
  8. Aluminum MMI: Aluminum prices continue to receive support
  9. China’s aluminum supply chain trauma on the heels of the coronavirus outbreak
  10. Aluminum MMI: Chinese aluminum demand remains strong, imports surge

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