aluminum price

natural gas

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Before we head into the weekend, let’s take a look back at the news that was and some of the metals storylines here on MetalMiner: Soaring natural gas prices and inflation; China’s aims to further reduce steel output; Aluminum prices near a decade high, according to our Monthly Metals Index coverage. Look for the Copper MMI and more next week.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.  Read more

The Aluminum Monthly Metals Index (MMI) increased by 7.0%. Prices remain historically high, with Chinese prices increasing the most this month.

Throughout July, LME aluminum traded mostly sideways until the last few days of the month when the price spiked. LME prices reached $2,619/mt on Aug. 1. Prices are close to the decade high of March 2011, when prices went over $2,700/mt. While prices remain high, trading volumes on the LME were lighter than the previous month with the exception of the last day of month when prices and volume peaked. Volumes declined since, signaling that the uptrend looks weak.

Chinese prices differ from the LME, trading consistently higher throughout July. Trading volumes were light though and only spiked on the last day of the month, signaling a similar trend to LME prices.

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Aluminum prices get U.S. Senate attention

The aluminum Midwest Premium price hit a record high of $0.32/lb at the end of July. The Midwest premium increase is driven by a rundown in Western warehouses and off-warrant inventory to locations convenient for onward shipment to China, which remains a net importer of unwrought aluminum since Q2 of 2020. Another driver was the 15% Russian export tax on aluminum, as Russia is the second-largest exporter of primary aluminum to the U.S.

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A recent post from the Russian news agency Interfax paints a predictably conciliatory line on the impact of Russia’s export tariffs on RUSAL.

aluminum ingot

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The post faithfully reports RUSAL’S complaints that the introduction of export duties will make some of the group’s export supplies unprofitable. It add that it may force the company to mothball a number of lower-margin assets, quoting Roman Andryushin, the company’s deputy general director of sales.

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RUSAL and Russia’s export tax

According to Andryushin, RUSAL produces about 4 million tons of primary aluminum and alloys a year. Of that total, it exports 2.8 million tons. He added that the imposition of a 15% export tax will result in losses running into hundreds of millions of dollars.

As a result, RUSAL is suggesting the impact will be a slowdown in capital expenditure to modernize its Siberian plants. Furthermore, it says it will lead to the delay in the launch of the Taishet aluminum smelter, the first stage of which was due to start deliveries this year.

Whether the impact of the export tariff on RUSAL’s profitability will be quite as dire as the company suggests is debatable.

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As if aluminum buyers didn’t have enough to contend with, including long mill lead times and rising conversion premiums, they are also dealing with a rising Midwest premium.

Furthermore, Russia’s move to impose a 15% export tax on unwrought aluminum has had a profound impact on the Midwest delivery premium.

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Midwest premium continues to soar

aluminum ingot stacked for export

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A recent Reuters article reports that the CME Midwest premium has jumped to a record high of $660 per ton ($0.30/lb). As a result, product manufacturers and their end users are facing an all-in price for unwrought raw material in excess of $3,000 per metric ton, even before conversion to product premiums are added in.

But the post goes on to explain that Russia’s export tax is not the sole reason for seriously elevated physical delivery premiums.

Over the last few years, the shift in exchange and off-market global inventory has been from North American and European markets toward Asia.

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MetalMiner experts recently joined ROTH Capital Partners for a webinar that covered a wide range of metals topics, including oil prices, macroeconomic trends, and insights into the aluminum, steel and copper markets.

bull market

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The webinar, which took place July 14, followed up on a previous MetalMiner-Roth webinar on May 20, 10 days after metals surged to record highs. Copper, for example, reached an all-time on May 10. MetalMiner CEO Lisa Reisman and Vice President of Business Solutions Don Hauser joined to share their insights on various markets, recapping metals movements in the two months since that peak.

If you missed it live, register here to receive a copy of the webinar recording to hear all of Reisman and Hauser’s insights from the hourlong webinar.

On July 28, get a sneak peek of the MetalMiner annual budgeting and forecasting workshop (a three-hour virtual event that will take place in August 2021). Get ready to plan for 2022. 

Bull market

While prices have come off of the record highs seen in May, they remain elevated. In short, we remain in a bull market.

“We are still in a bull market,” Reisman said. “The nonferrous metals are taking a pause but unless we see them start to fall off toward support levels … they’re still in a bull market.”

However, in terms of the “supercycle” narrative — which we have covered in this space previously — MetalMiner remains skeptical.

“The reason we’re struggling with the big supercycle narrative is that we would expect to see a decade, 1o years, of sustained, upward demand,” she said. “We don’t quite see that.”

With that said, metals demand currently is strong across a range of industries.

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The Aluminum Monthly Metals Index (MMI) increased by 0.9% this month, as aluminum prices traded mostly sideways but remained historically high.

July 2021 Aluminum MMI chart

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Aluminum prices

Throughout June, LME aluminum prices cooled off. However, in the last week of the month, prices picked up and surpassed the $2,550/mt mark by the first week of July.

Trading volumes during the first week of July were lower than the June average of 14,426 metric tons. Volumes were heavier on days when the price went down, meaning there is no strong market signal.

Chinese prices trended differently from their LME counterpart. Chinese aluminum prices traded sideways throughout June and the first week of July. In June, trading volumes approximately tripled as the price went up but immediately declined, along with the price which could signal a bullish market.

Russia to impose export tax on metals

The economy minister of Russia, Maxim Reshetnikov, announced that the government was contemplating adding an export duty of at least 15% for steel, nickel, aluminum and copper, effective Aug. 1 through the end of the year.

The measure comes as an effort to protect its defense and construction industries as metal prices continue to rise globally.

However, these tariffs could have a particularly negative global implication for the aluminum market. Rusal controls about 10% of the global aluminum sector.

Moreover, Russia is the second-largest exporter of primary aluminum to the U.S. As such, the U.S. domestic aluminum market would feel an even bigger squeeze, causing further increases in the Midwest premium.

Tight supply

According to Bloomberg, buyers in Japan agreed to pay a premium of $185 per ton above LME prices for the coming quarter, the highest in six years.

This is a sign of a tight aluminum market. As the World Bureau of Metal Statistics reported this month, the aluminum market from January to April 2021 posted a deficit of 588,000 tons.

The deficit is due to a rapid turnaround in the economy. Demand slowed as travel declined early on during the pandemic but has since snapped back strongly.

The price rally has triggered several countries to take measures to help put a cap on price increases. Russia appears poised to implement export tax changes. Furthermore, China plans to release strategic reserves of the metal for the rest of the year.

New aluminum recycling plant

Norwegian industrial company Hydro Aluminum Metal signed a letter of intent to purchase a property in Cassopolis, Michigan, with the objective of building an aluminum recycling plant. The plant will produce aluminum extrusion ingot for use in critical automotive applications, in addition to other transportation and building systems.

The plant is estimated to cost a total of $120 million with a 120,000-metric ton capacity. The final product will be Hydro’s signature “Hydro CIRCAL® extrusion ingots, which contain at least 75% post-consumer scrap certified by third party auditors DNV GL.” The ingots have a CO2 footprint of 2.3 kg CO2e/kg aluminum, Hydro said.

Actual metals prices and trends

LME three-month aluminum increased by 4.1% month over month to $2,535 per metric ton as of July 1.

Chinese primary cash aluminum decreased by 2.0% to $2,901 per metric ton. Chinese aluminum scrap declined by 1.3% to $2,060 per metric ton. Meanwhile, Chinese aluminum billet went down by 1.3% to $2,380 per metric ton.

European 1050 aluminum sheet increased by 2.0% to $3,649 per metric ton.

Indian primary cash declined by 2.2% to $2.266 per kilogram.

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Russia’s plan to introduce from Aug. 1 a temporary export duty on metal exports has brought varied reactions from European industry watchers and market participants.

“It’s about showing the strength of the Russian metals industry,” one analyst told MetalMiner.

Russia’s planned tariff may also be a retaliatory measure against Europe and its proposed carbon tax on metals imports from high-carbon producers, of which Russia is one, the analyst added.

“It feels like it is a broadside shot,” the analyst said.

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Russia export duty to cover steel, base metals

tariff

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The Russian Federal Government’s Decree No. 988 of June 25 stipulates a 15% export duty from Aug. 1 to Dec. 31 on all steel – semi-finished and finished – as well as on copper nickel, and low-grade aluminum leaving the country and the wider Eurasian Economic Union (EAEU).

Member states of the EAEU include Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. In addition, Cuba, Moldova and Uzbekistan are observer states.

One of the more likely beneficiaries in Europe from the duty is the steel sector, sources told MetalMiner.

“Everybody loves this,” one analyst said about Russia’s tentative export duty, as it could further push up already-high prices for steel products in Europe.

Domestically produced hot rolled coil for Q4 production within Western Europe is now €1,170-€1,200 ($1,390-1,420) per ton exw, traders said. That marks an increase from the €1,120-1,130 ($1,370-1,385) reported earlier in June.

Planned shutdowns of rolling equipment or banking of hot ends for maintenance over Europe’s summer months could also further push up prices in the face of high demand throughout Western Europe, the analyst stated.

One steel trader voiced a similar opinion.

“This is great for everybody” the trader noted, as the decree will push up steel prices on both the domestic and import markets.

“Who’s gonna wait until the end of the year to acquire steel if Russia is out of the market?” the trader rhetorically asked.

Ukraine’s Metinvest is likely to also benefit from this. The group is a major supplier of long products into the E.U. Resulting higher prices will also mean more revenue.

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However you slice and dice the statistics — and there are numerous ways stats can be sliced and diced — the global aluminum market is tight.

Whether we look at primary ingot, extrusion billet or rolling slab intermediates, or semi-finished sheets/plates, tubes and extrusions mill lead times are long and conversion premiums are high. Meanwhile, the global economy has bounced back from the pandemic. Local distortions, such as tariff barriers, to traditional supply chains have added to bottlenecks and robust restocking.

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

Aluminum deficit to surplus

aluminum price

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According to the International Aluminum Institute (IAI), total global aluminum production rose to 5.74 million metric tons in May. The total marked its highest level and a rise of just under 6% compared to this time last year.

Admittedly, last year was distorted by the pandemic. However, from January through May, global smelters operated normally around the world. The pandemic hit consumption badly, but output remained resilient.

Not surprisingly, therefore, this year to date swung to a 588,000-ton deficit compared to over a 1-million-ton (1,074 kt) surplus, as reported by the World Bureau of Metal Statistics for the whole of last year.

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It would seem Beijing only has to speak and the market reacts — this time, it’s about base metals.

Worried by what it sees as excessive inflation in commodity prices, which it fears will lead through into factory gate increases, China warned speculators last month over “excessive speculation.” The warning from China’s National Food and Strategic Reserves Administration hit the iron ore market hard, the Financial Times reports, sending the price 10% lower.

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China turns to base metals

China aluminum

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This month, Beijing has turned its attention to base metals.

The authorities have hinted they may release metal from their strategic reserves. The move would be an overt attempt to dampen further price rises in what it sees as a speculator-fueled rally. Where applicable, it would provide additional supply for those metals where supplies are genuinely tight.

The country holds strategic reserves in copper built up over decades. During slumps, like after the financial crisis, Beijing has stepped in to support domestic producers.

State secrets

As a strategic reserve, copper stocks are a state secret.

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China’s steel and aluminum market is undergoing a quiet revolution.

It’s not a revolution of investment or innovation.

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Peak aluminum, steel in China?

China aluminum

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According to Reuters, Beijing’s target of peak coal use by 2030 is asserting a dampening effect on new steel mill and aluminum smelter investment.

As such, the country could be at or near peak production. As Reuters’ Andy Home notes, the country’s rising output over the years as had a dampening effect on prices. That trend has led some Western producers to cease operations.

But a combination of harsher environmental legislation resulting in Beijing dissuading investment in new coal fired power projects, combined with Western markets’ meaningful action — after years of simply complaining — to block out Chinese exports of aluminum and steel products suggests the Chinese impetus to build capacity and the rest of the world’s willingness to buy product are both going through a transformational change.

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