aluminum price

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President Donald Trump announced today the removal of the U.S.’s Section 232 tariffs on steel and aluminum with resect to NAFTA partners Canada and Mexico.

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The tariffs had remained in place since June 1, 2018, when temporary exemptions for Canada, Mexico and the E.U. were allowed to expire.

Trade officials from the three countries had expressed optimism earlier this week that a deal was near to remove the 25% steel tariff and 10% aluminum tariff.

The move marks a major step toward approval of the United States-Mexico-Canada Agreement (USMCA), meant as the successor to NAFTA.

“I’m pleased to announce that we’ve just reached an agreement with Canada and Mexico and we’ll be selling our products into those countries without the imposition of tariffs, or major tariffs,” Trump told the National Association of Realtors, as reported by USA Today. “Big difference.”

President Donald Trump, Canadian Prime Minister Justin Trudeau and then-Mexican President Enrique Peña Nieto signed the USMCA during the G20 Summit in Buenos Aires late last year. However the three countries’ legislatures must ratify the deal before it can go into effect.

As such, both Mexico and Canada in recent months have indicated that they would be unlikely to approve a deal without removal of the tariffs. Likewise, members of the U.S. Congress, both Republicans and Democrats, also indicated a deal would not be approved unless the tariffs are removed vis-a-vis imports of steel and aluminum from Canada and Mexico.

U.S. Rep. Kevin Brady, the top Republican on the House Ways and Means Committee, lauded the move.

“Canada and Mexico are strong allies and have taken significant steps to assure that trade-distorting and subsidized steel and aluminum from third countries will not surge into the U.S. market,” Brady said.

“With this crucial issue resolved, now is the time for Congress to advance USMCA – delay means the United States continues to lose out on more jobs, more customers for Made-in-America goods, and a stronger economy.  Congress should take up this updated and modernized agreement, which will produce strong wins for America.”

David MacNaughton, Canada’s ambassador to the U.S., hailed the agreement to remove the tariffs.

“This is a victory for both our countries and our highly integrated steel and aluminum industries,” he said in a tweet Friday.

According to a joint statement issued by Canada and the United States, in addition to removal of the tariffs the countries will implement measures to “prevent the importation of aluminum and steel that is unfairly subsidized and/or sold at dumped prices” and “prevent the transshipment of aluminum and steel made outside of Canada or the United States to the other country.”

The joint statement also addresses situations in which imports levels surge.: “In the event that imports of aluminum or steel products surge meaningfully beyond historic volumes of trade over a period of time, with consideration of market share, the importing country may request consultations with the exporting country. After such consultations, the importing party may impose duties of 25 percent for steel and 10 percent for aluminum in respect to the individual product(s) where the surge took place (on the basis of the individual product categories set forth in the attached chart). If the importing party takes such action, the exporting country agrees to retaliate only in the affected sector (i.e., aluminum and aluminum-containing products or steel).”

Canada will also rescind retaliatory tariffs on U.S. products imposed last summer. In addition to a variety of steel and aluminum products, the list of items targeted for retaliatory duties included coffee, yogurt and orange juice.

From the Analysts: Price Impacts of Removal of Section 232 Steel and Aluminum Tariffs for Canada and Mexico

With the removal of tariffs on imports of aluminum from Canada and Mexico, announced today by the U.S. government, MetalMiner anticipates the aluminum U.S. Midwest Premium may finally drop from the current level of around $0.19 per pound due to the easing of restrictions on the flow of prime material cross-border.

Source: MetalMiner data from MetalMiner IndX(™)

As of now, the LME aluminum price does not appear to show any impact from the news, with the price still sitting close to yesterday’s closing value.

Source: FastMarkets

Given the lack of major producers of semi-finished materials in both Mexico and Canada, MetalMiner does not anticipate a flood of materials to hit the U.S. market; therefore, buying organizations can continue to expect tightness for semi-finished aluminum commercial grade sheet and coil. Buying organizations will likely not see large price drops for semi-finished sheet and coil products.

On the other hand, given that the 25% tariff on steel effectively deterred imports of that metal to the U.S., MetalMiner does expect to see an impact on steel prices as imports of steel increase.

Canada serves as the largest exporter of flat rolled steel products, as well as long products, with Mexico taking the No. 3 position. For tubular products, Canada and Mexico take the No. 2 and 3 positions. For stainless steel, Mexico serves as the fourth-largest exporter to the U.S. and Canada does not export stainless to the U.S. in a major way.

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MetalMiner does not expect to see any major changes in domestic stainless steel prices, as most of the global suppliers of stainless steel still face the 25% Section 232 tariff.

While industrial metals started 2019 in an upward trend, the complex showed weakness as 2019 progressed.

In fact, all of the industrial metals hit down around current support levels — and lower at times — during the past few weeks.

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With industrial metals down across the board, are we moving into bear market territory? Or have we witnessed a temporary blip resulting from less certain macroeconomic conditions?

To examine the situation in more detail, let’s have a look at some of the key industrial metals and recent prices.

The DBB Trended Back Down to Mid-January 2019 Values

After a bullish start to the year, the DBB peaked on a short-term basis in early April, then trended back down once more.

Compared with July 2018’s larger drop, this one appears milder, but the short-term downward trend remains.

Source: MetalMiner analysis of NASDAQ.com data

The DBB tracks three key industrial metals: aluminum, copper and zinc. Let’s take a look at each metal to assess price performance using the LME 3-month futures price.

LME Aluminum

Looking at weekly trading volume, it looks like the downtrend in price is played out (based on recent positive trading volume). Also, both positive and negative weekly volumes looked weak recently, with a lack of momentum in prices.

Source: MetalMiner analysis of Fastmarkets.com

This indicates continued sideways movement on the LME aluminum price.

Given that the aluminum market moved largely sideways during the course of 2019, the Moving Average Convergence/Divergence (MACD) can also indicate where the market is at this time.

The MACD tracks the difference between two exponential smoothed moving averages (using the 12- and 26-day averages); it’s the black line in the graph below, which sits along the bottom edge below the price line. The red line, or signal line, uses the nine-day exponentially smoothed average of the MACD.

Source: MetalMiner analysis of Fastmarkets.com

When the values hold above zero, this indicates the market is overbought. When they are below zero, this indicates the market is oversold. If the lines continue to trend downward, then the downtrend is still in process.

By this indicator, the aluminum market looks oversold and a buy signal emerged recently when the longer-term line turned up after a couple of days of upward market momentum and edged past the signal line. The signal line followed a day later, indicating the downtrend lost steam.

Based on this analysis, aluminum prices may have already hit bottom and turned around; therefore, the aluminum market itself does not look bearish at present.

LME Copper

LME copper prices lately have showed clear weakness. However, they found support again recently in daily trading, stopping a further slide in price.

With negative trading volume still registering on a weekly basis, the price dynamic for copper still looks weak.

Source: MetalMiner analysis of Fastmarkets.com

Looking at volume on a weekly basis, we can see that it trended up again last week. Through the first few days of this week, volume registered as negative on the partial week’s data.

Copper prices still look weak.

LME Zinc

Like the other industrial metals, LME zinc prices trended downward in April.

Looking at weekly volumes for zinc, the price action looks mixed. (Note that the last bar shows only partial data for the week in progress.)

Source: MetalMiner analysis of Fastmarkets.com

Given the clearer trend when looking at LME zinc prices, we can use the 4-9-18 day moving average analysis to assess the state of the current downtrend. The result of the analysis shows the downtrend remains in process as the moving averages queue in the expected order, with the 18-day average on top (blue line), followed by the nine-day (purple line), then the four-day average (red line).

Source: MetalMiner analysis of Fastmarkets.com

Therefore, in the case of LME zinc (using this method) the downward trend continues. The red line, however, the shortest average and therefore most sensitive, has recently shown signs of turning back up.

Source: MetalMiner analysis of Fastmarkets.com

Looking at a MACD analysis, based on the 12-, 26-, and nine-day periods, the downtrend continues with the signal line in red sitting above the MACD line in black, while both continue in a downward trend below the zero point of the MACD indicator bar.

Readings below zero on the indicator show bullishness in the sense that prices may turn around. However, in this case the lines continue moving in a downward trend, so we may not have seen the bottom of zinc prices just yet.

What this Means for Industrial Buyers

During recent weeks, the main industrial metals tracked by MetalMiner showed weakness. Will this be temporary or are we looking at a more cyclical movement into bear market territory?

While aluminum prices look relatively stable, copper and zinc prices appear weaker, with no clear signal given that the downturn has passed.

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Therefore, while it’s too soon to call a bear market, it’s also too soon to say we’ve avoided one.

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A year on from the U.S.’s anti-dumping and countervailing duty orders on Chinese aluminum foil, imports of the product have plunged.

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The Aluminum Association Trade Enforcement Working Group filed a petition requesting relief from imports of Chinese aluminum foil in May 2017. Almost one year later, the U.S. Department of Commerce issued anti-dumping and countervailing duty orders on aluminum foil from China ranging from 55-176%.

Since then, according to an Aluminum Association white paper released Tuesday titled “Targeted Trade Enforcement in Action: Aluminum Foil AD/CVD One Year Later,” imports of Chinese aluminum foil have fallen significantly.

Imports of aluminum foil from China by volume fell 64% from 2017 to 2018, down from 272.4 million tons to 97.7 million tons. The white paper also notes imports of “unfairly traded aluminum foil” from China accounted for 60% of U.S. import market share in 2017, but just 20% in 2018.

Monthly U.S. imports of Chinese aluminum foil, 2010-2018. Source: Aluminum Association

The white paper also touts an increase in investment in the domestic aluminum industry.

“Companies like JW Aluminum and Granges worked for the past several years to reinvest in the U.S. foil industry,” the Aluminum Association white paper states. “These firms have announced substantial capital investments – with a combined value of approximately $169 million – to expand and strengthen facilities at which they manufacture aluminum foil.”

Aluminum Association President and CEO Heidi Brock lauded the trade action’s impact on the domestic aluminum industry.

“One year after taking strong action to enforce our nation’s trade laws, we are seeing clear and significant progress in the U.S. aluminum foil market,” Brock said. “We’d once again like to recognize the hard work of the administration, including the Commerce Department and the International Trade Commission, in helping aluminum foil producers in the U.S. to compete on a level-playing field.”

Brock also highlighted the action taken vis-a-vis aluminum foil compared with the Trump administration’s blanket tariffs on steel and aluminum imports via a Section 232 probe. In that case, the Aluminum Association has called for the tariffs on trading partners like Canada and Mexico to be removed and for the Trump administration’s trade enforcement focus to be squared on Chinese overcapacity.

“Not all tariffs are created equal,” Brock said. “Targeted trade enforcement as we’ve seen successfully deployed in the aluminum foil and, more recently, common alloy sheet, markets are the best way to make an impact. This approach allows us to effectively address issues in the marketplace while avoiding needless and disruptive tariffs on vital trading partners who play by the rules.”

The Section 232 tariffs on imported steel and aluminum — of 25% and 10%, respectively — remain in effect with respect to imports from Canada and Mexico. That fact remains a sticking point in the ongoing process to approve the pending United States-Mexico-Canada Agreement (USMCA), the intended successor to the 1994 North American Free Trade Agreement (NAFTA).

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The USMCA was signed by President Donald Trump, Canadian Prime Minister Justin Trudeau and then-Mexican President Enrique Peña Nieto during the G20 Summit in Buenos Aires late last year. However, the agreement must be ratified by each country’s legislature before it can go into effect.

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This morning in metals news, the Canadian government announced it is rolling out $100 million in funding for its domestic steel and aluminum industries, copper moves toward a seven-month high, and Vietnam’s steel exports to the U.S. increased in 2018.

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Canadian Steel, Aluminum Get a Boost

The Canadian government has announced it will offer $100 million in funding to small- and medium-sized aluminum and steel firms in the country, the CBC reported.

The U.S.’s Section 232 tariffs on steel and aluminum remain in place for NAFTA partners Canada and Mexico. Those tariffs are the primary point of contention as the successor to NAFTA — the United States-Mexico-Canada Agreement (USMCA) — still needs to be ratified by the three countries’ legislatures.

Copper Continues Hot Streak

The copper price moved toward a seven-month high on Tuesday, Reuters reported.

LME copper jumped 1% to $6,472.50 per ton, according to the report.

Vietnam Steel Sector Grows

Despite the U.S.’s aforementioned Section 232 tariffs, one southeast Asian country saw its steel exports to the U.S. rise last year.

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According to an S&P Global Platts report, Vietnam’s finished steel exports to the U.S. surged 48% in 2018 compared to 2017.

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The March Aluminum Monthly Metals Index (MMI) increased again this month, rising 2.3% for an index value of 88, up from February’s value of 86.

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LME aluminum prices ended February near the price at the month’s outset, thus ending only slightly higher month on month following a dip in price around mid-month.

The LME price ended at $1,913/mt and once again failed to breach the long-term price resistance point of $1,970/mt during February. In the early days of March, the price dropped further to around $1,872/mt during trade at the start of the first full week.

Prices show weakness in that the slope of increase has continued to decline as the year progresses.

Source: Fastmarkets

SHFE prices have flattened out. The metal currently is moving in a sideways price trend on the back of a strengthened pricing pattern (when compared with generally falling prices in China since September).

Source: MetalMiner analysis of Fastmarkets

Prices appear constrained by high levels of Chinese production of both alumina and aluminum, in addition to weakening Chinese domestic demand. During 2018, Chinese aluminum production increased by 9.9%, rising to 72.53 million tons.

Recently, the Chongqing-based Bosai Group restarted Chalco’s Nanchuan alumina plant that closed in 2014 due to low alumina prices. According to a recent Reuters article, Bosai leased the plant from Chalco for the next 15 years with alumina production underway and the first production to come off the line very soon. This will add to raw alumina supply and may contribute to further price declines as the new supply comes online.

U.S. Domestic Aluminum

Meanwhile, the U.S. Midwest Premium rose slightly in February to $0.19/pound, and still remains at a historic high. Even with the rising premium, ingot prices continue to trend lower due to strong supply.

The LME Western European Aluminum Premium stayed flat, coming in at $75/mt in February, while the LME East Asian Aluminum Premium also stayed flat at $85/mt.

What This Means for Industrial Buyers

During February, aluminum prices continued to trend sideways.

Industrial indicators show a weaker domestic economy in China, which could constrain price increases.

LME warehouse stocks increased quite a bit into the new year, also likely dampening price increases. SHFE warehouse stocks also remain sizable from a longer-term perspective, with some restocking increasing volume into 2019.

These factors suppress aluminum price increases, even in an uncertain macroeconomic trade environment.

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Actual Aluminum Prices and Trends

Both LME and SHFE aluminum prices continued trending sideways during the past month. While the U.S. Midwest Premium nudged upward this month and remains high, it is offset by strong supply.

India’s primary cash price increased 9.9% this month, while China’s primary cash price increased 2.1%. Korean prices fell this month in the 3-4% range.

On the heels of the doldrums of December, metals prices have made gains through the first two months in 2019.

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February was an especially strong month for a number of metals.

However, markets are especially sensitive to any snippets of news coming out of the ongoing U.S.-China trade talks. President Donald Trump recently delayed the March 1 deadline for a planned tariff rate increase as talks continued.

Whether the two countries reach a meaningful deal anytime soon remains to be seen; as of now, however, metals prices are enjoying a bit of upward momentum.

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Last week, MetalMiner reported on the challenges India’s steel companies face in the form of cheaper imports, and their desire for the Indian government to impose an import tax.

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The woes of India’s aluminum producers, too, are similar.

Primary and secondary producers have started grumbling about cheaper imports eating into their aluminum business.

The ongoing trade war between the U.S. and China has seen the dumping of aluminum finished products in India, not only from China but also from nations with whom India has a free trade agreement, including Vietnam, Malaysia and Japan.

Anil Agarwal, of the Aluminium Secondary Manufacturers Association, was quoted by the Business Standard newspaper recently as saying that the import of finished aluminum products into India had eroded the margins of medium and small players by as much as 7%.

According to estimates, such imports have gone up by over 50% year on year, which has put the small and medium-sized enterprises (SMEs) businesses in peril. Total aluminum imports have grown 21% year over year.

Between April and October 2018, aluminum imports into India increased 24% year over year. In addition, low prices and rising production costs have also made life difficult for the domestic aluminum industry. Production costs, for example, have gone up as much as 30% over the past approximately four years.

Primary and secondary aluminum producers, like their steel counterparts, have been asking the Indian government to hike the import duty on primary aluminum to 10% from the current 7.5%, according to the Business Standard.

India’s domestic aluminum industry has about 3,500 MSME players, the Business Standard notes, while there are three large primary producers —Hindalco Industries, Vedanta and the state-owned National Aluminium Company (Nalco).

Scrap aluminum imports, too, have gone up dramatically.

But imports of aluminum scrap carry a 2.5% import duty, even though imports have gone up by about 27%, by the industry’s reckoning.

Indian producers lament they cannot compete with countries like China. The latter is able to produce aluminum at a cheaper rate because it follows the Shanghai Metal Exchange for price, which is U.S. $250-300 per ton lower than that on the London Metal Exchange.

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Incidentally, India has set a target of producing 10 million tons of aluminum by 2030, up from the present-day 3.4 million tons.

With the February 2019 Monthly Metals Index (MMI) report, we can officially move past  2018 and begin to take a look at the world of metals thus far in the new year.

On the trade front, trade officials from the U.S. and China met in January for renewed talks on the ongoing trade standoff between the economic powerhouses. A March 2 deadline approaches, however, after which President Donald Trump had previously indicated the U.S. would up its tariff rate from 10% to 25% on a a wide variety of Chinese imports (worth approximately $200 billion).

However, this week the president indicated he might not stick to that March 2 deadline, which could allow for further negotiations between the two countries if the deadline were postponed.

Meanwhile, in the world of metals, seven of our 10 Monthly Metals Indexes (MMIs) made gains this post month, with the remaining three posting no movement.

A few highlights from this month’s round of MMI reports:

Read about all of the above and much more by downloading the February 2019 MMI Report below:

The aluminum price has been fluctuating between around $50/ton above and below a median of $1,900 for several months now.

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There is considerable uncertainty as to where it is going to go in 2019, yet some commentators, such as ING Bank, are predicting prices will hit U.S. $2,250/ton by the end of the year on the back of constrained supply.

Of course, we should define what we mean by constrained supply.

There are two aluminum markets: one in China and the other being the rest of the world. They no longer operate quite in parallel universes as Alcoa’s ex-boss Klaus Kleinfeld once suggested, their intersection being Chinese exports of semi-finished metal – that metal that both exists within the Chinese market and the rest of the world.

How that volume of semi-finished exports varies tells us a lot about the state of the Chinese and global markets.

Although lifted by record November exports, the January-November figure is up 20.2% from a year earlier, to 5.28 million tons. That figure is on track to hit almost twice the total production of the world’s largest producer outside of China: Rusal.

Much of Rusal’s production is primary, of course, and China’s exports are semis. However, semis flooding the Southeast Asian and wider markets depresses or replaces local demand for primary metal, so the comparison remains valid.

China’s exports are often not given the attention they deserve as a dynamic in the global aluminum price.

Despite the primary metal deficit persevering in the world outside China, premiums have weakened, with ING noting European premiums have edged lower for several months now. As a result, inflows of material into LME warehouses have increased — since early December, LME inventories have increased from 1.04 million tons to around 1.3 million tons.

In Asia, premiums have also been weaker.

Japanese spot premiums are trading at around U.S. $77/t, down from over U.S. $90/t in October, with quarterly premiums for 1Q 2019 of U.S. $83-$85/t, compared to U.S. $103/t in the previous quarter.

Meanwhile, cost pressures have eased with fears of disruption from Rusal’s alumina refineries now removed and an expectation that Norsk Hydro’s Alunorte refinery could be back to full production in the first half, reducing supply-side fears.

At the same time, China has moved from being a net importer to a net exporter of alumina. As a result, alumina prices have fallen from levels as high as U.S. $640/t over parts of 2018 to around U.S. $370/t currently. The alumina/aluminium price ratio has also fallen from a peak of 31% in September 2018 to 19% currently.

Even so, according to U.S. producer Alcoa’s advice last week reported by Reuters, at current prices some 30-40% of the world’s smelters are losing money, which explains why supply-side primary metal growth flatlined in the second half of last year. Even Chinese smelters reacted to the low price environment.

Under the circumstances, ING’s $2,250/ton looks optimistic for the year end. As with every prediction this year, that has to come with the caveat that it depends what happens to trade talks, as so much expectation on the direction of global GDP growth appears to depend on that issue.

The longer uncertainty goes on, the more of a drain it will be on investment and the potential for continued positive growth in H2 and next year. For now, the U.S., China, emerging markets and even Europe appear to remain in positive GDP growth mode (although it has to be said, Europe’s numbers are meager).

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Positive demand growth and continued constrained supply suggest a lift in prices this year is in the cards. However, rising Chinese exports remain a worry.

If the domestic market is not absorbing this tonnage and the SHFE price remains depressed due to oversupply then the deflationary impact of those exports is unlikely to simply go away.

The February Aluminum Monthly Metals Index (MMI) edged up this month by 1.2% for an index value of 86. The index increased one point from January’s reading and has remained near the low last seen in February 2017, when the index hit a value of 84.

 

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LME aluminum prices trended upward at the start of January but lost some momentum and are moving sideways to start February. Prices continued to show weakness by failing to breach the price resistance point of $1,970 during January (the support price for most of 2018).

Source: MetalMiner analysis of Fastmarkets

With only a weak uptrend followed by some sideways movement, prices have grown weaker at $1,783/mt this month. The politics of trade and financial uncertainty in China, rather than supply and demand in the aluminum market, continue to direct LME price levels into early 2019.

Source: MetalMiner analysis of Fastmarkets

Typically, SHFE prices move similarly to LME prices, but with a lag.

As January played out, SHFE prices stayed weaker — within the pricing trendlines identified by MetalMiner in the January MMI report — with clear sideways movement, especially during the second half of the month.

U.S. Domestic Aluminum

The U.S. Midwest Premium continued to move sideways in January at $0.18/pound, ending the month at the same price point. As previously pointed out by MetalMiner, the Midwest Premium remains at a historical high. According to some analysts, the outlook on the U.S. Midwest Premium is bearish and expected to fall through April.

The European Premium fell from $150/ton to $60/ton, attributed to the removal of sanctions on Rusal. Japanese Q1 aluminum premiums also dropped significantly (by 17-19%).

Sanctions on Rusal Lifted

The U.S. lifted sanctions on aluminum giant Rusal on Jan. 27 following the company’s compliance with the removal of the Russian oligarch Oleg Deripaska — along with several other influential Russians, identified due to their ties with Russian President Vladimir Putin — from its board and parent company En+.

Given that Section 232 tariffs on imports of aluminum remain in place, this should limit ingot price decreases from the removal of sanctions on Rusal; this could be bearish for ingot prices.

But that does not explain what is happening in the commercial alloy/semi-finished market.

Due to the increased use of flat-rolled aluminum in the automotive industry, supplies of the semi-finished metal have grown tight in the U.S. marketplace. The usage of aluminum in vehicles will likely continue to increase due to the need for automakers to adapt to 2025 Corporate Average Fuel Economy (CAFE) fuel economy standards. Some additional vehicle lines, especially those with greater sales volume, could convert to aluminum “white bodies.” For 2018, the Ford Expedition and Lincoln Navigator now also use aluminum bodies.

To give some sense of what this means in terms of aluminum usage, a single Ford F150 truck uses an estimated 676.3 pounds of aluminum per vehicle. With sales of 909,330 units in 2018, that translates to around 608 million pounds of aluminum sheet. Add in the two additional models (the Ford Expedition and the Lincoln Navigator) and it’s easy to see why flat-rolled tightness exists.

What This Means for Industrial Buyers

Aluminum prices are trending slightly upward this year; however, at this time, prices are in a short-term sideways trend. Tariffs and supply concerns linger and should continue to support prices.

Only the MetalMiner Monthly Outlook provides a continual snapshot to aid buying organizations with the pricing data that can help determine when and how much of the underlying metal to buy.

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Actual Aluminum Prices and Trends

LME aluminum prices rose during January, but the uptrend lost steam as the month played out. LME primary 3-month prices ended the month at $1904/mt, around 3% higher than December’s closing price of $1,846/mt.

SHFE aluminum prices continued to fall overall, with sideways movement during the second half of January.

Chinese aluminum bar prices rose by 3.1% to $2,152/mt. and the Chinese aluminum primary cash price increased by 2.52%. However, Chinese aluminum billet decreased this month by 1.69% to 2052.47/mt.

Korean commercial grade 1050 sheet continues to decline at a slower rate, ending about 0.91% lower at the end of January. The Indian cash price increased 3.78% from $1.85 to $1.92, retracing some of the price decrease of 6.6% reported last month.