Monthly Index Belies LME Aluminum Price Forecast, Premiums

Includes: JUNR, PICK, XME
by: MetalMiner

by Raul De Frutos

aluminum price index chart

The monthly Aluminum MMI® registered a value of 89 in March, on par with February's value. The 3-month LME price closed the month of February at $1,765 per metric ton; a small bounce from the record lows registered at the beginning of the month.

Most analysts are optimistic with the future role of aluminum in the automotive industry, expecting demand from automakers to gradually increase in the next few years. But at the same time, producers are already investing on upgrading facilities, so it is hard to estimate how exactly this will balance over time just yet.

Aluminum physical premiums continue to play a big role in the total price an industrial buyer pays for its aluminum products, as prices keep weakening and premiums continue climbing. While some groups question the sustainability of aluminum premiums, others insist that high premiums are here to stay.

So where is the price going?

Regarding the LME price, HSBC is calling for prices to average around $2,000 per metric ton through the end of the year. Based on the current picture, we would be very surprised to see this prediction coming true. We remain bearish on aluminum and it wouldn't surprise us to see prices recording new lows in March.

Aluminum three-month LME price since 2013 chart

LME 3-month aluminum price since 2013. Source: MetalMiner IndX, MetalMiner analysis

Key Price Drivers of Aluminum Index

Following a 3.7 percent upswing on the LME, the cash price of primary aluminum closed the month at $1,724 per metric ton. It was a strong month for European 5083 plate. The metal posted a 3.6 percent increase, finishing at $3,374 per metric ton. Last month, the aluminum 3-month price rose 3.3 percent on the LME to $1,765 per metric ton. The Indian aluminum cash price increased 0.9 percent to $1.75 per kilogram. The price of European 1050 aluminum increased 0.6 percent to $2,859 per metric ton. The cash price of Chinese aluminum fell 4.6 percent to $2,101 per metric ton.

Korean 3003 coil premium over 1050 sheet held pat last month at $3.95 per kilogram. At a price of $4.09 per kilogram, Korean 5052 coil premium over 1050 sheet did not budge the entire month. Hovering around $2,311 per metric ton for the month, Chinese aluminum bar remained unchanged. Chinese aluminum billet traded sideways last month, staying around $2,211 per metric ton. Korean 1050 aluminum sheet experienced a flat month, staying around $3.90 per kilogram. Prices for Chinese aluminum scrap remained constant this past month, holding at around $1,993 per metric ton.

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