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Aluminum prices rise despite increasing global primary aluminum output

As we noted yesterday, aluminum prices have continued to rise — this in spite of increasing global aluminum production. Sign up today for Gunpowder, MetalMiner’s free, biweekly e-newsletter…

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As we noted yesterday, aluminum prices have continued to rise — this in spite of increasing global aluminum production.

Sign up today for Gunpowder, MetalMiner’s free, biweekly e-newsletter featuring news, analysis and more.

Global aluminum production rises 3.5%

According to the latest data from the International Aluminum Institute, global aluminum production rose 3.5% in October from the previous month.

October output reached 5.59 million metric tons, up from 5.40 million metric tons in September.

Global aluminum production rose 4.5% year over year from 5.35 million metric tons in October 2019.

China output chugs along

Meanwhile, aluminum production in China totaled an estimated 3.23 million metric tons in October, up from 3.13 million metric tons the previous month.

Furthermore, China’s production reached 2.98 million metric tons in October 2019.

Despite gains in output, the aluminum price has continued to rise. Since the LME three-month price’s April trough, aluminum is up 37%.

As MetalMiner’s Stuart Burns explained last week, China’s metals demand has supported prices this year, even as other economies are not quite as far along in their respective economic recoveries.

“Much of that rise has ridden on the back of a resurgent Chinese economic recovery driving such strong domestic demand that the country has switched to becoming a net importer on key metals this year,” Burns wrote of the economic recovery’s impact on metals prices.

“Ongoing policy stimulus in China has made its way into industrial and construction investment. That should continue to boost investment and industrial output in the coming months.

“Retail sales, while slow to recover in the early summer, are now back to pre-pandemic levels. Auto sales have benefited from pent-up demand earlier in the year supporting the retail sales numbers.”

Here and there

Meanwhile, North American output reached 334,000 metric tons, up from 317,000 metric tons the previous month. North American output in October 2019 totaled 316,000 metric tons.

In relevant U.S. aluminum news, a Senate committee recently allocated funding for a new Aluminum Important Monitoring system.

The system would be aluminum’s equivalent of the extant Steel Import Monitoring and Analysis system.

In addition, GCC production totaled 490,000 metric tons, up from 469,000 metric tons the previous month.

East and Central European output totaled 351,000 metric tons in October, up from 338,000 metric tons the previous month.

Asian production ex-China totaled 350,000 metric tons, up from 341,000 metric tons in September.

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Metal

Copper price eases, but for how long?

Copper bulls who were betting on continued price rises — or, more importantly, copper consumers worried about escalating copper costs — may be looking at the copper price and wondering what is going…

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Copper bulls who were betting on continued price rises — or, more importantly, copper consumers worried about escalating copper costs — may be looking at the copper price and wondering what is going on.

Prices hit over $9,600 per metric ton in late February but have since fallen back.

Although experiencing volatility, the copper price has traded in a roughly +/- 2% band just below $9,000 per metric ton since.

copper bars

Shawn Hempel/Adobe Stock

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Copper price views

Bulls like Goldman Sachs argue this is just a pause, ignoring the build in LME stocks. Instead, it points to the collapse in smelter treatment charges as proof the market remains tight.

Low mine output results in tight concentrate supply. When that happens, smelter treatment charges chase the market down in an effort to secure concentrate to process. Treatment charges rise during times of plentiful concentrate supply and fall during times of concentrate famine, Reuters notes.

The contract treatment price for Q1 is $59.50 per ton, the lowest since 2011.

But even more telling is the collapse of the spot price. The Asian treatment charge recently reached $21.90 per ton, the lowest since 2013, according to Fastmarkets.

Reuters even reports one sale by Antofagasta of 10,000 tons of copper concentrate for June shipment being agreed at about $10 per ton and one cent per pound TC/RC.

China smelters on maintenance

Not surprisingly, Chinese smelters are putting plants onto maintenance until the situation improves. As a result, there is a loss of between 200,000 and 250,000 tons of production, Goldman Sachs estimates.

A lot of new smelter capacity coming on stream in China in the last two years has exacerbated the situation. While refined copper demand remains strong, smelters can only refine concentrate if they can get it.

So why isn’t refined metal being sucked into the country as a result?

Under such circumstances, increasing LME stocks are the last thing you would expect.

But as we wrote recently, another factor at play is China’s reclassification of scrap grades. As a result, higher-quality copper scrap has surged into the country. That flow of scrap has replaced, at least for the time being, the need for concentrate.

JP Morgan less bullish on copper

JP Morgan is apparently not so bullish as Goldman. According to Reuters, the bank is saying the lack of concentrate supply is a temporary, pandemic-induced issue that is past its peak.

As a result, mine supply is now increasing. Greater concentrate supply will improve metal availability. This is the case for Chinese smelters and for the rest of the world, which has also seen exceptionally low refining charges.

JP Morgan is forecasting copper prices to peak at $9,000 per ton this quarter and slide back to $7,865 per metric ton over the second half of the year. It argues more plentiful mine supply will take the steam out of the copper market.

Copper consumers no doubt hope JP Morgan have got it right.

But as Reuters observes, smelter stocks are low and will take time to replenish. In the meantime, the lack of smelter output in Q2 will leave the market undersupplied in what remains a robust demand environment.

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Metal

Week in Review: Steel prices; US electricity consumption; rising aluminum premiums

Before we head into the weekend, let’s take a look back at the week that was and the metals storylines here on MetalMiner, including coverage of steel prices, US electricity consumption and…

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Before we head into the weekend, let’s take a look back at the week that was and the metals storylines here on MetalMiner, including coverage of steel prices, US electricity consumption and much more:

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Week of April 12-16 (steel prices, electricity consumption and more)

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Metal

US flat rolled steel prices still strong, firm prices expected into Q2

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Information Provided By:

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