aluminum price

Over three years later, analysis, assessments and calls for removal or maintenance continue to pour in with respect to the former Trump administration’s Section 232 tariffs on steel and aluminum.

In 2018, former President Donald Trump used Section 232 of the Trade Expansion Act of 1962 to impose tariffs on steel and aluminum of 25% and 10%, respectively, citing national security concerns. The administration sought to boost domestic industry and bring capacity utilization rates up to around 80% (considered a barometer of industry health).

With respect to aluminum, the Economic Policy Institute (EPI), in a white paper released this week, argues for the success of the Section 232 aluminum duty.

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EPI: Section 232 aluminum tariff spurred investment, jobs growth

tariffs overlaid on US currency

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Among its primary conclusions, the EPI white paper argues the 10% duty has led to job growth in the sector and increased production.

“Projects, investments, jobs, and capacity are on the rise since the initiation of the Section 232 aluminum tariffs,” the EPI argued. “At least 57 new and expansion projects are in downstream aluminum industries producing extruded (rod and bar, pipe and tube, and extruded shapes) and rolled (sheet and plate) products. These new and expanded facilities will employ more than 4,500 additional workers, generate $6 billion in new investments, and add more than 1.1 million metric tons of annual rolling and extrusion capacity to the downstream domestic aluminum industry.”

Furthermore, the EPI argued US primary aluminum production increased on the heels of the Section 232 tariff.

US primary aluminum production increased by 37.6% from March 2018-February 2020 compared with the previous two-year period, the EPI said.

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This morning in metals news: new-vehicle retail sales are on pace to hit their highest total ever for the month of May, according to J.D. Power and LMC Automotive; meanwhile, new orders for manufactured durable goods declined in April after 11 straight months of gains; and, lastly, LME aluminum has backtracked over the last two-plus weeks.

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

New-vehicle retail sales set to have record May

auto sale

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US new-vehicle retail sales are on pace to have a record May, J.D. Power and LMC Automotive reported in their jointly released automotive forecast today.

They project new-vehicle retail sales this month will reach 1,388,600, good for an increase of 34.0% year over year. Furthermore, the sales forecast would mark a jump of 10.6% compared with May 2019 sales.

“The U.S. auto industry is showing tremendous adaptability in maintaining a record sales pace, despite historically low inventory levels,” said Thomas King, president of the data and analytics division at J.D. Power. “May is usually one of the highest-volume sales months with buying activity peaking around the Memorial Day weekend when manufacturers typically offer incremental incentives. This year, notwithstanding supply constraints and significantly reduced incentives from manufacturers, May 2021 will be another record-breaking month for the industry.”

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aluminum ingot stacked for export

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A bullish report in Reuters last week advising metal output in China was breaking records, again, looks at odds with developments this week.

Relentlessly rising prices have taken a sharp about-turn, the BBC reported.

See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your aluminum buy.

Rising metals output

Reuters reported that China’s aluminum production in April rose to a record monthly volume. China’s primary production reached 3.35 million metric tons in April. That marked a 2.3% jump from 3.28 million tons in March. Furthermore, it jumped by 12.4% from April 2020.

Nor was April an anomaly.

In the first four months of the year, China produced 13.02 million tons, a rise of 9.6% from the same period a year earlier. High prices and strong demand encouraged smelters to ramp up output. In addition, power restrictions in Inner Mongolia were eased.

The SHFE price hit 20,000 RMB ($3,106) per ton, the highest since 2011. In addition, production of 10 nonferrous metals — including copper, aluminum, lead, zinc and nickel – rose 11.6% to 5.48 million tons from a year earlier. Year-to-date output of the 10 metals rose by 11.5% to 21.43 million tons.

High prices have boosted output. While strong demand has also been a factor, investors have gone long and bid up prices.

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This morning in metals news: aluminum roller and recycler Novelis announced its quarterly financial results; meanwhile, the United States International Trade Commission voted Tuesday on anti-dumping duties for prestressed concrete steel wire strand; and, lastly, the Consumer Price Index rose by 0.8% in April.

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

Novelis reports ‘outstanding’ quarter

earnings sign

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Aluminum roller and recycler Novelis reported net income of $180 million during the quarter ending March 31, 2020 (Q4 of fiscal year 2021).

The performance marked a jump from $63 million in Q4 of fiscal year 2020.

“Guided by our purpose and driven by the resilience of our people and the strength of our partnerships, we safely navigated this extraordinary year to achieve outstanding results,” President and CEO Steve Fisher said. “With the ongoing successful integration of Aleris, a diverse and innovative product portfolio, and unmatched geographic footprint, we have proven our ability to deliver sustainable aluminum solutions to customers in a way that resulted in record financial performance.”

Furthermore, among other factors, higher average aluminum prices helped drive a 33% year-over-year rise in sales to $3.6 billion.

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The Aluminum Monthly Metals Index (MMI) jumped 7.7% for this month’s reading, as the aluminum physical delivery premium continues to rise.

May 2021 Aluminum MMI chart

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Delivery premium continues to rise

aluminum ingot stacked for export

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The US Midwest Premium, like just about everything else these days, continued to inch upward in recent weeks.

After falling to $0.12 per pound in early February, the premium has more than doubled since then. The Midwest Premium hit $0.26 per pound ($573 per metric ton) to close last week.

As MetalMiner’s Stuart Burns noted previously, rising delivery premiums are an indicator of market tightness.

“China’s pull on the rest of the world’s aluminium supply does not appear to be abating,” Burns explained last month.

“Beijing has tried to cool speculative activity, which is undoubtedly playing a part in the SHFE price premium.”

In addition, he said elevated premiums are likely to remain a feature of the market the rest of this year.

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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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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

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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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