aluminum price

The Aluminum Monthly Metals Index (MMI) ticked up 2.0% for this month’s reading, as aluminum premiums remain elevated.

April 2021 Aluminum MMI chart

Does your company have an aluminum buying strategy based on current aluminum price trends?

Rising physical delivery aluminum premiums

For aluminum buyers vying for material, they’re finding physical delivery premiums are elevated.

In fact, rising premiums are a sign of market tightness, MetalMiner’s Stuart Burns explained this month. Furthermore, premiums are up in both the US and Europe.

Among the reasons for the rise, China’s shift to net importer has led to the country sucking up a large share of available supply.

“The resulting arbitrage has sucked in imports of both pure and alloy ingot,” Burns wrote. “China imported nearly a quarter of a million tons of primary and over 140,000 tons of alloy metal in just the first two months of this year. That brought its cumulative net totals to 1.3 million tons of primary and 1.1 million tons of alloy since the start of 2020.

“Imports like that, much on spot markets or via traders, has sucked exchange traded and shadow market metal east, placing it conveniently for short onward shipment to China.

“As a result, there is less metal available in warehouses in Europe and the US.”

The Midwest Premium reached $0.22 per pound this week. In January, the premium had fallen as low as $0.12 per pound.

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aluminum ingot stacked for export

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In a recent webinar MetalMiner ran for key clients, we posed a question regarding the recent rise of aluminum physical delivery premiums: what was behind rises and would they last?

Physical delivery premiums are a significant cost to consumers. It can be a cost that is hard to hedge except for large consumers with access to exchange-traded financial hedging instruments.

So, understanding what is driving higher premiums is helpful in terms of judging the likely trajectory of future metal costs.

Are rising MW premiums causing concern? See how service centers take advantage of that. 

Rising aluminum physical delivery premium

There are several platforms for reporting physical delivery premiums. For the US, the CME is the probably the best.

Reuters illustrated the relentless rise of the aluminum physical delivery premium since the start of Q4 2020. The Midwest Premium is now back above $400 per metric ton, a level not seen in two years.

 

If it is any consolation to our US readers, North America is not alone in seeing rising costs.

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wind and solar electricity generation

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This morning in metals news: US energy consumption fell by 7% in 2020; the United Steelworkers union commented on the details of President Joe Biden’s American Jobs Plan; and the aluminum price retraced last week.

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US energy consumption down 7% in 2020

Amid the impact of the COVID-19 pandemic, US energy consumption fell by 7% in 2020, the Energy Information Administration (EIA) reported.

“Last year marked the largest annual decrease in U.S. energy consumption in both percentage and absolute terms in our consumption data series that dates back to 1949,” the EIA said. “Much of the 2020 decrease in energy use is attributable to economic responses to the COVID-19 pandemic that began in the United States during the spring of 2020.”

USW on American Jobs Plan

As we noted last week, the United Steelworkers union last week announced a strike at nine Allegheny Technologies Inc. facilities. The move could have significant ramifications for stainless steel buyers, should it linger.

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Three years have passed since former President Donald Trump imposed Section 232 tariffs on steel and aluminum.

The administration cited national security concerns when imposing the tariffs. In addition, it aimed to raise capacity utilization of the US steel and aluminum sectors. (For the week ending March 20, US mills reached a steel capacity utilization rate of 77.3%.)

steel tariff

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Some countries received exemptions and domestic buyers have been able to win exclusions, which have mitigated the strength of the tariffs.

Metals consumers have expressed their opposition to the tariffs. For example, the Coalition of American Metal Manufacturers and Users (CAMMU) called for an end to the tariffs last year, citing the negative economic impact of the COVID-19 pandemic.

However, a recent review of the tariffs offered a more positive view.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

EPI: Section 232 tariffs produced ‘near-immediate benefits’

According to a recent report this week by the Economic Policy Institute (EPI), the Section 232 tariffs offered “near-immediate benefits.”

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The aluminum market is undeniably tight, as consumers are having to wait months for metal and the Midwest Premium rises. In some locations — Europe, in particular —  consumers of rolled plate cannot secure new production space until well into Q3.

aluminum ingot stacked for export

Olegs/Adobe Stock

Some mills have even pulled out of quoting for new business customers in 2021. Anti-dumping legislation on flat rolled products from China and a fire last year at a Russian rolling mill have combined to dramatically restrict supply options for consumers.

As a result, prices have moved up.

Are you on the hook for communicating the company’s aluminum performance to the executive team? See what should be in that report

US aluminum situation

The US is no better.

Semi-finished product prices are rising and lead times are extending. It is convenient to blame the recent decision to apply substantial anti-dumping duties on 18 countries supplying the US with flat rolled commercial aluminium. The move has severely distorted the supply market. A significant number of major supplying countries, including Germany, South Korea and Turkey, are shut out by the high tariffs.

However, the tariffs are not the only reason the market is tight.

As intended, the supply chain has now switched focus to domestic — or, at least, USMCA members’ North American mills. The result is lengthening lead times and price rises.

Some consumers have asked why the LME primary metal price hasn’t risen further in view of the tight market. The reality is what we are seeing is a distorted supply market, not a global primary metal shortage.

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ArcelorMittal logo

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This morning in metals news: ArcelorMittal announced a series of low-carbon initiatives; meanwhile, US import prices increased in February; and, lastly, the aluminum price has picked up this week.

Are you on the hook for communicating the company’s steel performance to the executive team? See what should be in that report

ArcelorMittal unveils XCarb™ low-carbon initiatives

ArcelorMittal today announced a trio of new low-carbon initiatives under the umbrella of what it is calling XCarb™.

“XCarb™ will ultimately bring together all of ArcelorMittal’s reduced, low and zero-carbon products and steelmaking activities, as well as wider initiatives and green innovation projects, into a single effort focused on achieving demonstrable progress towards carbon neutral steel,” ArcelorMittal said.

The program will include green steel certificates for customers.

“Across our ArcelorMittal Europe – Flat Products operations, we are investing in a broad range of initiatives to reduce carbon emissions from the blast furnace,” ArcelorMittal said. These initiatives range from our flagship Smart Carbon projects, such as Torero (transforming biomass into bio-coal to replace the use of coal in the blast furnace) and Carbalyst (capturing carbon-rich blast furnace waste gas and converting it into bio-ethanol, which can then be used to make low-carbon chemical products) to capturing hydrogen-rich waste gases from the steelmaking process and injecting them into the blast furnace to reduce coal use.”

In addition, the program includes recycled and renewably produced “pioneering products.”

Lastly, XCarb™ will also include an innovation fund. ArcelorMittal says it will invest $100 million annually into the fund. The fund will go toward “groundbreaking companies developing pioneering or breakthrough technologies that will accelerate the steel industry’s transition to carbon neutral steelmaking.”

Import prices rise

In addition to today’s ArcelorMittal news, US import prices picked up 1.3% in February, the Bureau of Labor Statistics reported.

Import prices gained, in part, due to higher fuel prices.

Prices for import fuel rose 11.1% in February after rising 9.0% in January.

Aluminum price gains

The LME three-month aluminum price closed Tuesday at $2,201 per metric ton.

A week ago, LME three-month aluminum reached $2,169 per metric ton.

Does aluminum content call to you? We’re rolling out more on LinkedIn.

tariffs headline over $100 bills

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Despite howls of protest from consumers, the Biden administration has doubled down on the Trump administration’s trade barriers with its latest move on aluminum tariffs.

The administration recently slapped semi-finished flat rolled aluminium anti-dumping duties on 18 countries supplying the US market.

Don’t miss the MetalMiner analyst team on March 24 at 10 a.m. CDT for a 30-minute metals market forecast and strategies to deploy in falling markets: https://zoom.us/webinar/register/WN_6J8wAyYySfihVk3ZUH9yMA.

Aluminum tariffs

Previous administrations’ focus on China — first on extrusions in 2011 and then foil and sheet in 2018 — succeeded in bringing down imports from 620,000 metric tons in 2017 to 170,000 tons last year, Reuters reported.

However, the wider Section 232 10% tariff is so riddled with exclusions and special exemptions that imports from the rest of the world have continued to make up a significant proportion of the market supply landscape.

Imports of sheet, plate and strip totaled 1.3 million metric tons in 2019. That represented about 62% of total aluminum product imports that year, according to Reuters. Although volumes shrunk sharply to 836,000 tons last year, this was due to the broader COVID-19 disruption to the U.S. manufacturing sector.

Total semis imports last year fell by 20%. Domestic shipments dropped by only 13% through November, suggesting the imposition of preliminary duties in October was already impacting buyers’ decisions.

According to Reuters, the new duties hit seven of last year’s top 10 product suppliers to the U.S. market, including South Korea, Germany and Turkey.

Canada, Saudi Arabia avoid aluminum tariff

The duties spared Canada, however, from which imports increased by 17%. They also spared Saudi Arabia, where Alcoa retains a close relationship with the Ma’aden smelter and rolling mill, despite having divested its 25.1% shareholding in 2019.

That Alcoa and its Saudi partner should essentially get an exemption comes as no surprise.

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ArcelorMittal logo

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This morning in metals news: amid GFG Alliance’s financial crisis, ArcelorMittal has reportedly asked for cash upfront to supply Sanjeev Gupta’s steel mills; meanwhile, a so-called “green hydrogen” facility in Germany has started operations; and, finally, the LME three-month aluminum price has trended sideways this month.

Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.

ArcelorMittal to ask for cash upfront to supply GFG mills

We’ve covered GFG Alliance’s financial crisis amid the collapse of its primary financial backer, Greensill Capital.

As a result, suppliers are looking for assurance of payment.

This week, Bloomberg reported ArcelorMittal is asking for cash upfront to supply GFG mills, as the latter grapples with questions of financing.

German green hydrogen facility starts up

A green hydrogen project in Germany called WindH2 has kicked off operations, CNBC reported.

The project involves German steelmaker Salzgitter, Avacon (a subsidiary of electric utility company E.ON) and multinational chemical company Linde.

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The Aluminum Monthly Metals Index (MMI) picked up 6.3% for this month’s reading, as the China aluminum sector could get a price boost from the 14th Five-Year Plan. Furthermore, the Department of Commerce made anti-dumping and countervailing duty determinations on aluminum sheet.

March 2021 Aluminum MMI chart

Don’t miss the MetalMiner analyst team on March 24 at 10 a.m. CDT for a 30-minute metals market forecast and strategies to deploy in falling markets: https://zoom.us/webinar/register/WN_6J8wAyYySfihVk3ZUH9yMA.

China’s 14th Five-Year Plan

By virtue of its having the largest aluminum and steel sectors in the world, China also faces a massive pollution problem.

Particularly given coal’s ongoing prevalence in the country, pollution is a problem Beijing is seeking to solve.

While some might question if the latest five-year plan goes far enough on climate, it is, at least, a step in the right direction.

As MetalMiner’s Stuart Burns explained yesterday vis-a-vis steel, the impact of the plan will be similar for aluminum.

In short, it could mean a tightening of supply and potentially rising prices in the medium term.

“The environmental targets are part of the new Five Year Plan and, as such, will evolve over the coming years rather than be applied over coming months,” Burns noted regarding the plan’s impact on aluminum. “But it may add a little fuel to investors’ interest in a tightening supply market narrative that underpinned copper and nickel prior to the recent selloff, and to a lesser extent that for aluminum.”

Overall, Burns said he expects China’s latest plan to be supportive rather than outright bullish in the short to medium term.

Xinhua, the state-run news agency, reported this month that China’s 14th Five-Year Plan will promote “green development and facilitate the harmonious co-existence between human and nature during the 14th Five-Year Plan (2021-2025) period, according to a government work report submitted Friday to the national legislature for deliberation.”

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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.

Are you under pressure to generate aluminum cost savings? Make sure you are following these five best practices

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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