Aluminum
Aluminum production

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The Aluminum Monthly Metals Index (MMI) increased by 5% for this month’s MMI value.

August 2020 Aluminum MMI chart

SHFE prices stronger than LME prices

LME and SHFE aluminum prices continued to trade up.

The LME price reached $1,783/mt on Aug. 10, a six-month high. Meanwhile, the SHFE price reached CNY 14,820/mt on Aug. 3, a year-to-date high.

However, the SHFE aluminum price has continued to diverge from LME aluminum prices since April, with the SHFE being higher than the LME.

As a consequence, LME warehouse stocks have remained above 1.6 million tons since mid-June. These are the highest levels seen since May 2017.

The elevated stock level is due to a combination of low raw material prices and the high cost of shutting down primary smelters. This is in line with the estimated market surplus for January to May of 908,000 tons, as reported by the World Bureau of Metal Statistics.

Record imports amid strong Chinese aluminum demand

The price arbitrage between the LME and the SHFE, along with the strong Chinese demand, have incentivized traders to purchase aluminum at the discounted price overseas.

As a consequence, China imported 816,592 metric tons of aluminum, up 219.2% year on year for the first half of the 2020. In June alone, China imported 490% more than a year ago, reaching an 11-year high.

Reuters reported that Antaike, the China Nonferrous Metal Industry Association’s research department, revised its 2020 aluminum consumption by 1.7%. Antaike’s new estimate is 36 million tons, compared to the previous estimate of 36.6 million tons.

Since China’s demand for aluminum does not seem to be declining, it is set to be a net importer of primary aluminum this year, closing at 400,000 tons.

Last year, China was a net exporter at 1,000 tons.

Trump reinstates tariff on some Canadian aluminum

On Aug. 6, President Donald Trump reimposed a 10% tariff on some Canadian aluminum products to protect U.S. industry from excessive imports. The tariff applies to raw, unalloyed aluminum produced at smelters. The tariffs do not apply to downstream aluminum products.

However, data released Aug. 5 by the U.S. Census Bureau showed overall primary aluminum imports from the U.S. to Canada declined about 2.6% from May to June. In short, that means imports are below levels seen as recently as 2017.

As a result, the U.S. market might see an increase in the MW premium, which will feed through to higher semi-finished prices. The MW aluminum premium is currently $0.12/lb.

After the tariff announcement, Canada pledged to impose retaliatory tariffs on C$3.6 billion (U.S. $2.7 billion) worth of U.S. aluminum products. During a news conference, Deputy Prime Minister Chrystia Freeland said the countermeasures would be put in place by Sept. 16 to allow for consultations with industry.

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

Actual metals prices and trends

The Chinese aluminum scrap price rose 7.6% month over month to $1,963.42/mt as of Aug. 1. LME primary three-month aluminum rose 6.2% to $1,722/mt.

Korean commercial 1050 aluminum sheet fell 3.7% to $2.79/kg, while its European equivalent rose 5.2% to $2,449.43/mt.

Chinese aluminum billet rose 6.5% to $2,144/mt. The price of Chinese aluminum bar rose 6.3% to $2,240.02/mt.

Chinese primary cash aluminum rose 4.6% to $2,132.53/mt. Indian primary cash aluminum increased 2.7% to $1.88/kg.

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Steel production

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This morning in metals news:

  • The U.S. steel sector posted another incremental increase in capacity utilization.
  • Meanwhile, the Aluminum Association applauded a Department of Commerce decision regarding subsidies of imported aluminum sheet.
  • Lastly, Alcoa criticized the Trump administration’s decision to reimpose the Section 232 aluminum tariff on imports from Canada.

Steel sector capacity utilization rises to 60.4%

The U.S. steel sector’s capacity utilization rate rose to 60.4% for the week ending Aug. 8, according to the American Iron and Steel Institute (AISI).

The rate marked an increase from 59.3% the previous week. Even so, the rate marked a steep decline from the previous year, when it reached 79.1%.

Production for the week ending Aug. 8 totaled 1.35 million net tons, up 2.0% from the previous week. However, production for the week fell 26.5% year over year.

Furthermore, production for the year through Aug. 8 fell 20.1% year over year.

Do you know which market conditions are best with different steel contracting mechanisms? Check out our best practices on this topic.

DOC issues preliminary determination in aluminum sheet subsidy probe

The Aluminum Association applauded the Department of Commerce’s preliminary determination in its subsidy probe related to imports of aluminum sheet from Bahrain, Brazil, India and Turkey.

According to the Aluminum Association, the DOC calculated preliminary subsidy margins of:

  • Bahrain: 9.49%
  • Brazil: 0.76-1.32%
  • India: 4.55-34.84%
  • Turkey: 0.07-3.15%

Next, the DOC will announce preliminary antidumping determinations by Oct. 7, 2020.

Alcoa critical of reimposition of Section 232 aluminum tariff

In a statement to the Pittsburgh Post-Gazette, aluminum maker Alcoa criticized President Donald Trump’s decision to reimpose the 10% Section 232 tariff on some imports of Canadian aluminum.

In March 2018, the U.S. initially imposed Section 232 steel and aluminum tariffs. Then, in May 2019, the U.S. rescinded the tariffs for imports from Canada and Mexico.

However, late last week, Trump announced the reimposition of the tariff for some aluminum coming from Canada.

Alcoa told the Post-Gazette the move would “cause unnecessary disruption” and “further distort the market.”

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Aluminum does appear to be having a surprisingly strong post-pandemic recovery — in China, at least.

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Canada

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This morning in metals news: the Aluminum Association of Canada reported the country’s aluminum exports to the U.S. have declined; Great Lakes region steel production is down this year; and the International Tin Association commented on Yunnan province’s tin stockpiling initiative.

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construction

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines on MetalMiner:

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Global aluminum production by volume fell in June compared the previous month but was about flat on a daily production basis.

Production totaled 5.27 million tons in June, down from the 5.45 million tons produced in May, according to reporting this week by the International Aluminum Institute.

On a daily average basis, June production was 175,800 tons per day (compared with 175,700 tons in May).

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photonewman/Adobe Stock

This morning in metals news: CEOs across the aluminum industry supply chain sent a letter to United States Trade Representative Robert Lighthizer to voice their opinion about a potential reimposition of aluminum tariffs on aluminum from Canada and Mexico; the International Aluminum Institute recently released global production figures for May; and the Energy Information Administration said U.S. oil and natural gas production hit record highs last year.

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At the behest of the American Primary Aluminum Association (APAA), U.S. Trade Representative Robert Lighthizer has been encouraged to push the Trump administration to rule this week against Canada’s duty-free status for primary aluminum into the U.S. market.

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Zerophoto/Adobe Stock

This morning in metals news, the U.S. is reportedly considering reimposing tariffs on Canadian aluminum, U.S. liquefied natural gas (LNG) exports have plunged and global copper mine production ticked up 0.5% in Q1 2020.

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Sunshine Seeds/Adobe Stock

This morning in metals news: Vale has announced a plan to resume operations at the Voisey’s Bay mine in Canada; U.S. imports of blooms, billets and slabs have surged in recent months; and Hindalco plans to sell a majority of its output outside of India this year.

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