aluminum price

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Aluminum consumers have watched the primary ingot price drift gradually lower since the beginning of this year.

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There have been peaks and troughs, of course, as the price is buffeted by trade news, mill outages or exchange rate movements.

Broadly speaking, however, our sideways market has been one of gradual decline.

As the price approaches the psychologically significant $1,700 per metric ton level, some will be wondering: can we expect resistance and a floor, or could prices continue down?

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The Aluminum Monthly Metals Index (MMI) dropped again this month, falling by one point to 83.

All but one of the prices tracked for the index dropped this month, with India’s primary cash price showing the biggest drop at 4.4%, followed by the LME primary 3-month price (down by 3.4%).

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LME aluminum prices weakened into early August and moved sideways until early September, when prices moved toward the $1,800/mt range.

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets.

SHFE Aluminum Prices Gained Recently, But Momentum Looks Weak

Source: MetalMiner analysis of Fastmarkets

SHFE aluminum prices increased recently, but upward momentum still looks weak, comparatively speaking.

Overall, the price is still moving in a sideways band below the CNY 14,500/mt level where it has traded during the past year or so; however, it looks set to break through this resistance price soon.

As reported by MetalMiner’s Stuart Burns, China’s top state primary aluminum producer, Chalco, reported an 8% drop in output for the first half of the year, compared with the same period of 2018. Primary aluminum production totaled 1.89 million tons, compared to 2.06 million tons during the first six months of 2018.

Additionally, outages brought output down temporarily, including flooding at Hongqiao. As a result of the outages, exports dropped to the lowest level since February. According to Reuters, exports dropped to 466,000 tons in August, down around 10% when compared with August 2018.

Global Demand Weakness Continues

While demand in the United States remained relatively stable, demand in other regions looks weaker.

Norsk Hydro recently announced plans to close some aluminum foil production in Germany as part of restructuring efforts aimed at increasing the profitability of its rolled products business.

Novelis’ Acquisition of Aleris Under Scrutiny

The U.S. Justice Department filed a lawsuit objecting to Novelis Inc.’s purchase of Aleris Corporation on Sept. 4 due to concerns over higher future prices for automotive aluminum sheet.

According to an issued statement, competition would be hindered, with Novelis controlling 60% of projected domestic capacity.

U.S. Aluminum Premiums

The U.S. Midwest Premium remains at around $0.18/pound.

What This Means for Industrial Buyers

The sideways to bearish market for aluminum led to the index decline. Buying organizations will need to pay careful attention to short-, medium- and long-term buying signals.

Buying organizations interested in tracking industrial metals prices with ease should request a demo of the MetalMiner Insights platform.

Buying organizations seeking more insight into longer-term steel price trends should read MetalMiner’s Annual Metal Buying Outlook.

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Actual Metal Prices and Trends

European commercial 1050 sheet increased by 1.3% to $2393/mt. European 5083 plate dropped by 2.1% to $2,729/mt.

India’s primary cash price dropped by 4.4% to $1.94/kilogram.

The LME primary 3-month price dropped by 3.4% to $1,746/mt.

Korean commercial 1050 sheet, 5052 coil premium over 1050, and 3003 coil premium over 1050 all decreased by less than 1%, to $2.96, $3.12 and $3.00 per kilogram, respectively.

Chinese prices all declined by under 1%. Aluminum billet priced at $2,061/mt, while bar priced at $2,729/mt. China’s aluminum scrap price dropped the most, by 0.9%, to $1,813/mt. The primary cash price stayed essentially flat at $2,015/mt.

Various sources are reporting both a slowing in demand growth and a fall in output for primary aluminum. So far this year, that combination has been led by a faster fall in output, pushing the market into a larger deficit position as the first half progressed.

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Reuters reported the results of a poll showing a forecast for a global aluminum deficit of 550,000 metric tons this year — down from an earlier estimate of 868,240 tons — as demand growth has recently slowed.

Inventory levels support estimates of a deficit.

Primary inventories in warehouses tracked by the Shanghai Futures Exchange (ShFE) are hovering at their lowest since April 2017, according to Reuters. LME stockpiles have improved recently, but are still down 22% from the beginning of the year.

Not surprisingly, futures markets in China are showing more resilience to a generally depressed commodities sector. The ShFE’s most-traded aluminum contract is at its highest since May 29, hitting 14,285 yuan ($2,022.02) a ton last week before easing to close at 14,200 yuan a ton.

The LME, on the other hand, has continued to drift lower over the last two weeks after failing to hold above $1,800 a ton in July.

The disparity in outlook is down to the domestic production situation in China.

New smelter startups have been delayed as Beijing is taking a hard line with aluminum producers, forcing those keen to open up new capacity to close corresponding capacity at older, less efficient plants. Summer production has at best been flat and first-half production is marginally down from last year’s level.

Investors have been encouraged as Typhoon Lekima stormed over Shandong province, causing widespread flooding. Although there are no reports yet of aluminum outages as a result of the typhoon, the expectation is some smelters will suffer flooding and/or power failures, resulting in lost production.

Consumption, however, is softening, both in China and the rest of the world.

Weaker automotive production is a significant factor, as trade worries are causing just that — worries — rather than a significant downturn in non-automotive consumption so far. Expectations are for a pickup in Chinese domestic primary production this fall as the impact of the flooding wanes and those delayed startups come onstream.

Meanwhile, consumption is expected to soften further in Europe and Japan as both areas flirt with stagnation at best or, possibly, outright recession (being the only remaining mature markets open to China after tariffs essentially shut off the U.S. market).

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The prospects this year for a rise in aluminum prices remain poor. However, if demand holds up and supply continues to be constrained, it could set the scene for a gradual rise next year, particularly if a resolution to the trade war is miraculously agreed.

The Aluminum Monthly Metals Index (MMI) dropped two points this month to 84. Most of the prices tracked for the index dropped this month, with European prices dropping the most (by close to 7.5%). 

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LME aluminum prices fared best of all of the aluminum prices this month, posting a mild increase of less than 1%. Aluminum prices continued to move sideways in July, generally trading above $1,800/mt.

However, the price ended July weaker, then dropped — along with most industrial metals —  following the U.S. announcement of $300 million in new tariffs on China (effective Sept. 1).

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets

SHFE aluminum prices moved sideways recently, but with some upward momentum evident and higher lows throughout the year.

Source: MetalMiner analysis of Fastmarkets

China produced 2.97 million tons of aluminum in June, down slightly from May’s production of 2.98 million tons. However, the June total was still up year on year by 1.3% up over May on a daily average basis, according to Reuters calculations. In May, production averaged 96,000 tons per day, and rose to 99,000 tons per day in June.

China’s higher daily production levels followed a jump in prices during May to around CNY 14,350/mt, which helped turned margins positive again for some smelters and fueled a production ramp-up.

China’s Zhongwang Holdings and its controlling shareholder, Liu Zhongtian, were recently charged with evading $1.8 billion in tariffs on aluminum imports. The company allegedly disguised the aluminum as pallets in order to evade the duties on U.S. imports from China.

Novelis Announces New High-Strength Automotive Aluminum Product

Novelis recently announced a new high-strength aluminum product for next-generation automotive body sheet design called AdvanzTM 6HS-s650.

According to the company, the advanced aluminum offers improved strength, lightweighting capabilities, formability, performance and structural integrity. The company estimates a 15-25% improvement over existing high-strength aluminum alloys. Compared with steel in similar applications, the end-weight outcome can be improved by 45%.

Novelis’ acquisition of Aleris faced new hurdles this month. European Union competition authorities required Novelis to offer concessions by Aug. 9. to gain approval for the $2.6 billion takeover.

U.S. Aluminum Premiums

The U.S. Midwest Premium dropped once again, but only slightly, to $0.17/lb. Softer demand in the U.S. still fails to offset supply tightness in the market, keeping premiums higher.

Source: MetalMiner Ind(X)SM

What This Means for Industrial Buyers

Demand weakness in most markets impacted the index this month. While macroeconomic uncertainty due to the latest trade situation recently impacted some prices, in the case of the weakening index, this came from a genuine downturn in demand.

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Actual Metal Prices and Trends

This month European prices decreased after increasing by around 2% last month. European commercial 1050 sheet and 5083 plate both dropped by 7.4% to $2,364/mt and $2,788/mt, respectively.

Korean prices also reversed and decreased this month after increasing in the 2% range in June. Korean commercial 1050 sheet, 5052 coil premium over 1050, and 3003 coil premium over 1050 all decreased in the range of 3-4% to $2.98, $3.15 and $3.02 per kilogram, respectively.

India’s primary cash price dropped by 2.9% to $2.03 per kilogram.

Chinese price movements were mixed and mild, holding essentially flat.

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The LME aluminum price gained the most, rising 0.8% to $1,807/mt.

That the aluminum market is in a deficit is a widely accepted fact — but it still remains hard to see in practice.

Usually when markets are in deficit, prices rise. Primary aluminum as quoted by the LME, however, has been at best sideways for the last year or more. Prices have gradually softened within the $1,700-$1,900 per ton range, although a recent run-up has seen prices north of $1,800 per ton this month.

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The problem is the shortfall between production and consumption has been made up from two notable sources.

The first is a gradual leakage of metal stored in off-market stock and finance deals by the financial community. The second is a rising tide of semi-finished metal from China that has depressed prices and caused uncomfortable competition for producers in the rest of the world (outside the U.S., at least).

Chinese semi-finished exports are seen as the release valve for excess domestic Chinese production in a market that produces half the world’s aluminum. The approximately 5 million tons per annum of Chinese exports is significant for the rest of the world, but still a fraction of China’s total output.

By comparison, western Europe consumed just over 5 million tons of flat-rolled and 3 million tons of extrusions in 2016-2017, according to European Aluminium, a trade body, underlining what a significant impact China’s exports can have when they flood mature markets like Europe.

This ready supply of semi-finished metal but more restricted supply of primary metal is one reason why delivery premiums, like the U.S. Midwest Premium, have remained elevated at over $400/ton.

The U.S. has to import much of its primary aluminum in the process, incurring Section 232 duty costs, delivery costs and opening the rather closed market to a speculative environment that has seen futures trades outnumber physical trades. The net result is an elevated Midwest Premium cost to consumers compared to western Europe or Japan (the other two main ROW markets).

But there is a change happening to the global aluminum market.

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The short-term fundamentals for aluminum do not look promising, if Alcoa’s latest report is to be believed.

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The major primary producer is struggling to create positive net cash flow, a measure of the firm’s ability to pay down its substantial debt, reporting a negative free cash flow of U.S. $7 million on its $2.7 billion second-quarter revenue. The firm posted a net loss of $402 million, or $2.17 per share, although it should be added this included a $319 million one-off cost to divest its interest in the Ma’aden Rolling Company (MRC) in Saudi Arabia (plus $81 million in other special items).

Beyond Alcoa’s ongoing woes, its comments regarding the current state of the market and its view of the second half of this year make interesting reading.

New York investment bank Jefferies is quoted as saying a primary aluminum capacity overhang globally and limited supply constraints are concerns going forward, especially in an environment where demand is likely to be relatively weak.

The aluminum price has drifted lower this year, depressed more by investor fears of a slowing global economy and, in particular, by the impact of the ongoing trade war on the world’s top producer and consumer, China.

In the case of alumina, a small market surplus has the bank concerned prices will continue to drift lower yet, even at current levels of around $350/ton spot. Primary producers’ margins are under pressure, with the LME price in the $1,750-$1,850/ton range. The bank says prices of around $2,100/ton are needed to provide an adequate return; if alumina prices and primary aluminum prices do not find a more equitable equilibrium, more smelter closures may ensue.

Alcoa is currently trying to close or sell two smelters in Spain, following closures across Europe over the last decade in France, Germany, Italy, the Netherlands and Britain.

Yet in the medium term, prospects for aluminum look promising.

Global demand is growing, albeit not at the level it was earlier in the decade. The market remains undersupplied, as demand is exceeding production to the tune of some 1.5 million-1.7 million tons per year.

The shortfall is being met by shadow stocks held by the stock and finance trade, which built up following the financial crisis of 2008 and are gradually returning to the market. In Jefferies’ estimation, global inventories are reaching lows not seen since 2007. So far, this has not impacted either metal prices or investor appetite for the metal.

Looking ahead, S&P is quoted as predicting prices will average $2,000/ton and $2,100/ton for 2020 and 2021, saying the longer-term fundamentals are robust, underpinned by expectations of a continued supply deficit, low inventory and solid aluminum demand growth globally.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Whether S&P’s longer-term optimism trumps Alcoa’s short-term gloom remains to be seen. Much will depend on global growth and mature markets avoiding a recession in 2020.

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Global aluminum production reached 5.25 million metric tons in June, the International Aluminum Institute reported Monday.

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The June total marked a decline from the 5.43 million metric tons produced in May and the 5.33 million metric tons produced in June 2018.

China led the way with 2.96 million metric tons produced in June, down from the 3.05 million metric tons produced in June 2018.

Asian production ex-China reached 360,000 metric tons, down from 368,000 tons in June 2018.

Production in the Gulf Cooperation Council (GCC) countries reached 449,000 metric tons, up from 437,000 metric tons in June 2018.

Production in east and central Europe reached 344,000 metric tons, up from 333,000 metric tons in June 2018.

In western Europe, production reached 284,000 metric tons, down from 310,000 metric tons in June 2018.

North American aluminum production hit 314,000 metric tons, up from 303,000 metric tons in June 2018.

African production hit 135,000 metric tons, down from 140,000 metric tons in June 2018.

South American production reached 95,000 metric tons, up from 88,000 metric tons in June 2018.

In other aluminum news, aluminum producer Alcoa announced the planned restart of its Aluminerie de Bécancour Inc. smelter in Quebec, Canada, after it reached a six-year labor agreement with the United Steelworkers Union.

The smelter, majority-owned by Alcoa, has an annual capacity of 413,000 tons. The restart is scheduled to begin Friday, July 26, and is expected to be complete during the second quarter of 2020, the company said.

The company forecast a global aluminum deficit ranging between 1.0 million tons and 1.4 million tons for 2019, down from last quarter’s forecast of a range of 1.5 million tons and 1.9 million tons.

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In addition, the company forecast global aluminum demand growth ranging between 1.25-2.25%, down from a previous forecast of 2-3%. The decline in the growth forecast was “driven by lower demand in both China and the world ex-China due to trade tensions and macroeconomic headwinds,” the company said.

The Aluminum Monthly Metals Index (MMI) held steady at 86 this month based on mixed price movements. While prices in China dropped in the 1% to 2% range, all other prices in the Aluminum MMI basket rose slightly.

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LME aluminum prices continued to fall into June, but recovered toward the end of the month. LME prices are currently moving sideways at around $1,800/mt, with the present price slightly higher at $1,807/mt.

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets

Due to lower LME prices, a recent forecast for Indian production projects a slowdown in output growth. Domestic production costs increased by around 25% during the past three to five years, putting break-even costs above the current LME price, which was at $1,777/mt in late June.

According to Reuters, Japanese aluminum premiums increased 3% to $108/ton for Q3 due to tighter aluminum supplies in Asia. Japanese producers initially sought increases to the $115-$120 per ton range. Weakness in the semiconductors market and trade worries capped gains.

Chinese Aluminum Prices

SHFE aluminum prices weakened during the past month, reversing the upward trend evident since around February 2019. Demand appears seasonally weaker at this time; therefore, market observers will want to watch prices carefully during the next month or two to see if the downtrend continues.

Source: MetalMiner analysis of Fastmarkets

In a normal cycle, prices might rise again as China moves away from seasonally hot and rainy weather.

According to a recent Reuters report, China’s aluminum production increased by 2.4% in May compared with May 2018 because of smelter restarts in response to higher prices, which could also contribute to the recent weakness.

Price weakness appears to be temporary. If prices do not increase, this will indicate a weaker-than-expected Chinese economy and/or that output continues to increase, with increased supply capping price gains.

Increased Aluminum Use on the Horizon Across Sectors

Aluminum prices may also receive future support from innovations beyond just the automotive sector, based on the metal’s flexibility and lightweight profile.

The Indian government announced that railway coach cars will transition to aluminum, while older conventional stock will begin a phaseout.

Coca-Cola announced its AQUAFINA® water brand will see an aluminum can package in U.S. food service outlets. The announcement comes as part of the company’s greater move to reduce the use of plastic packaging.

U.S. Aluminum Premiums

The U.S. Midwest Premium finally dropped, but only slightly, to $0.18/lb. With aluminum prices rising in most countries, supply tightness may continue to support the premium. The U.S. Midwest Premium still remains stubbornly high since the the U.S. removed its aluminum tariffs on Canadian and Mexican aluminum in May.

What This Means for Industrial Buyers

Price signals were mixed this month, with weaker Chinese prices contrasting with higher prices in the rest of the world. Global production increased, but not enough to offset overall tightness in terms of supply.

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Actual Metal Prices and Trends

Chinese prices dropped again this month, in the range of 1-2%. The Chinese primary cash price dropped 1.6% to $2,013/mt, while Chinese aluminum scrap fell 1.7% to $1,835/mt. Billet and bar prices dropped by 1.6% and 1.5%, respectively, to $2,080/mt and $2,177/mt.

This month, European prices increased. European commercial 1050 sheet increased by 2.3% to $2,553/mt, while the 5083 plate price increased by 2% to $3,011/mt.

Korean commercial 1050 sheet, 5052 coil premium over 1050, and 1050 all increased by around 2% to $3.1, $3.14 and $3.27 per kilogram, respectively.

India’s primary cash price increased 1% to $2.09 per kilogram.

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The LME primary 3-month aluminum price held essentially flat, increasing 0.28% increase to $1,794/mt.

Aluminum base prices on the London Metal Exchange (LME) have been sliding for the last couple of months, suggesting we have a market in surplus.

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So when the United States removed tariffs on imported steel and aluminum from Canada and Mexico last month, you would have expected the resulting flood of lower-priced aluminum would have driven down the Midwest Premium.

No such luck.

Despite a minor blip, it has remained stubbornly elevated at over USD $400 per ton, raising howls of protest from consumers (particularly in the beverage can market).

But before we accuse primary mills of gouging the market, let’s consider some points made by Andy Home in a Reuters article this week.

First, some context supporting the consumers’ position. Canada accounted for some 51% of aluminum supply to the U.S. market in 2018, with Australia, Argentina (who were exempted from the start) and now Mexico making up another 8%, so that nearly 60% of supply is now duty-exempt.

Yet prices have not really shifted despite jumping from $0.10/lb before the tariffs were announced to over $0.22/lb now – well above the 10% (about $0.08-$0.09/lb) that could reasonably be attributed to the tariff.

That raises the question as to what is really going on: if elevated Midwest Premiums are not really reflecting the 232 10% import tariff as many have maintained, then why do they remain elevated? Does their persistence after the tariff removal mean they may be a long-term feature of the market?

Technically the Midwest Premium has generally been explained as the cost of delivery to a U.S. consumer, largely reflecting haulage costs.

But while it is a reflection of that, it is also much more, Home suggests.

The CME contract traded volumes equivalent to almost 2.5 million tons last year, not just from trade hedging but as a market in its own right. The U.S. market remains incredibly tight. Prices aside, the loss of some 350,000 tons of supply from the Becancour smelter in Canada due to a lockout has not even begun to be replaced by domestic U.S. restarts amounting to only some 90,000 tons.

The market has continued to grow, but supply is constrained – surely that should be reflected in the LME price, you may ask?

Yes, in a fully functioning market it should be. The U.S. isn’t a market isolated from the rest of the world — so what are premiums doing elsewhere?

Rotterdam P1020 duty-unpaid premiums rose to about U.S. $100 per metric ton this month, up from $90-$95 per metric ton late last month. However, duty-paid premiums in less-traded and lower-volume Mediterranean markets, like Spain, eased slightly to U.S. $350-$360 per metric ton from a shade higher last month (not far off Midwest Premium levels, according to AluminiumInsider).

Premiums in South America are even higher, reaching U.S. $500 per ton in Brazil. The premiums are not reflecting the scarcity of metal, per se, so much as the scarcity of metal in a particular location.

But if some justification for the premium can be made, what about the elevated prices being paid by consumers despite a declining LME? Home has some thoughts for us on that, pointing to the revenue earned by suppliers in this elevated market, noting the U.S. government collected only around $50 million in tariffs.

Some of the difference, an estimated $27 million, went to U.S. primary aluminum smelters. The bigger part, $173 million, went to U.S. rolling mills. The latter, according to the article, have been pricing their can stock to include the 10% tariff, even though primary metal only accounts for around 30% of the input (the rest is scrap).

The beverage market is far from alone in this. For those consumers who do not break down the raw material, delivery premium and value-add elements of their pricing, mills have managed to push through price increases in excess of 10% on the back of less than 10% cost increases.

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Consumers, then, do have grounds for discontent.

What they do about it in the face of a still tight market for many grades is tough, but breaking out base metal, premium and gaining as much transparency as possible into the value-add is a big first step. It provides data for negotiation and a structure for analyzing price changes with greater power in the hands of the buyer.

In a difficult market, consumers need all the tools they can lay their hands on.

This month the Aluminum Monthly Metals Index (MMI) decreased, with weakness coming from all the prices tracked globally. The index value dropped back two points to 86, back to February levels after holding at 88 for three months.

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LME aluminum prices occasionally spiked in May. Prices showed some sideways price movement, yet continued to trend down overall. In early June, the closing price hit a new low for the year at $1,773/mt.

Source: MetalMiner analysis of FastMarkets

Source: MetalMiner analysis of FastMarkets

Looking at the past six months on the chart above, it’s a little easier to see that prices recently also dropped below January 2019 levels, signaling further price weakness could be on the horizon should relevant industries continue to slow at major growth engine points.

Aluminum Supply Deficit Forecast for 2019

According to a recent investor presentation prepared by Alcoa, the primary aluminum deficit will be between 1.5 million and 1.9 million metric tons. The Chinese market will remain supplied or slightly in surplus at 0.2 million mt of overage, with the deficit projected for the world ex-China.

Global inventory days continue to trend downward overall. After topping out at 119 days in 2009, they now hold at a projected 59 days of global consumption for the 2019 (down from a 70-day average last year).

Source: MetalMiner analysis of FastMarkets data

In the chart above we can see LME-held aluminum stocks have oscillated just above 1 million metric tons for roughly a year and a half. LME worldwide stocks measured at roughly 1.1 million metric tons in early June. These levels are drastically lower than stocks held between 2009-2015.

Automotive Innovation Continues to Tighten Aluminum Supplies

The automotive pull on aluminum supplies will continue to impact aluminum prices over the longer term. This impact will continue to increase as more automotive companies innovate with the metal and push for lighter overall vehicle weight.

Novelis, the producer of aluminum automotive body sheet for the popular Toyota RAV4 and NIO ES6, recently announced its first aluminum sheet battery enclosure solution, which it calls “a more sustainable mobility solution in battery electric vehicles, a market that is expected to more than triple globally by 2025,” it said in a recent company statement.

An industry chief from Constellium Bowling Green, the company’s automotive unit, cites the automotive market as the biggest growth opportunity for the aluminum industry in years. The company expects demand for automotive aluminum to hit 1.4 million tons annually by 2025.

The company also features aluminum battery enclosures for vehicles and makes crash management systems, side impact beams, decorative trims and emblems in aluminum, according to the company’s website. According to the company balance sheet, revenue from sales of packaging rolled and automotive rolled products increased by 12% in Q1 2019 compared with Q1 2018.

Braidy Industries‘ Atlas Mill, the first greenfield aluminum rolling mill in the U.S. in 37 years, according to the company, will open around 2021. According to its company chief, the next five years will be the best in the past five decades. Russian aluminum giant Rusal plans to take ownership of 40% of the project, but the deal presently faces congressional scrutiny.

On the other hand, some automotive lines may never end up making the shift over to aluminum if presented with other options, given the costs of white body production line conversion.

Nippon Steel, of Japan, understands the business threat and opportunity, responding recently by developing a new lightweight car body of steel with a 30% weight reduction.

In Japan, benchmark aluminum premiums increased to $115-$120 mt for Q3. According to press reports, the 10-14% increase follow tighter supply.

Chinese Aluminum Prices

SHFE aluminum prices continued to maintain upward momentum overall so far this year.

Source: MetalMiner analysis of Fastmarkets

Constrained capacity growth could support prices.

On the other hand, some capacity expansion plans for primary ingot are being reported independently by region, according to press reports. This includes the Guangxi Zhuang Autonomous Region’s plan to boost production of aluminum to 4.8 million metric tons by 2025, from the present annual amount of around 2.25 million metric tons in 2018 and an estimated 2.6 million tons for 2019, according to its Ministry of Industry and Information Technology.

Shortage of scrap material also constrains China’s domestic production due to China’s tightening of its scrap import policy. 

U.S. Aluminum Premiums

The U.S. Midwest Premium finally dropped slightly but still rounded to $0.19/lb in early June.

The higher premium indicates supply shortfalls remain.

As indicated by a recent Reuters report, suppliers may be holding the premium higher to cover the 10% import costs on materials. With Canadian and Mexican tariffs now removed, we might expect some drop in the premium.

Source: MetalMiner data from MetalMiner IndX(™)

However, looking at the chart above, the premium already increased a great deal in the year prior to the implementation of the tariffs, with the premium then sticking at that higher level.

U.S. imports of aluminum totaled $24.3 billion dollars, a drastic increase of 41.7% since 2014. Import growth leveled off after 2017, with domestic production already largely shut down due to poor margins.

What This Means for Industrial Buyers

With industrial metal markets still down, including aluminum, on an uncertain economic outlook, and as the U.S. Midwest Premium remains high, buying organizations need to watch the market carefully.

Looking for more pricing guidance? Request a free trial to MetalMiner’s Monthly Metal Buying Outlook.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Actual Metal Prices and Trends

Chinese aluminum prices dropped in the 1.7% to 3% range. Chinese aluminum scrap dropped 1.7% to $1,868/mt, while the primary cash price dropped 3% to $2,042/mt. Billet and bar prices decreased by 2.5% to $2,113/mt and $2,210/mt, respectively.

European prices showed the largest decrease in the index, with commercial 1050 sheet prices down 4.6% to $2,497/mt, while 5083 plate dropped 4.4% to $2,953/mt.

India’s primary cash price dropped 3.7% to $2.07/kilogram.

Other price drops in the index registered at less than 2%, including the LME primary 3-month aluminum price hitting $1789/mt following last month’s larger drop of 5%.