Steel Products Prices North America

CRU: Aluminum Price Climbs Higher

October 17, 2021

By Stephen Williamson, CRU Research Manager, Aluminum

Last week’s aluminum price below $3,000 per metric ton on the LME seemed like a bargain until it ran above $3,300 earlier this week. Yet, at week’s end, trading fell back to $3,050. Further confounding the market is magnesium supply and the prices raging on the hardener front. Fueled still by sustained energy constraints in China and tightening supply of alloy hardeners, global producers are scrambling to both secure physical metal supply and match all forward sales with bona fide supply. The price ended the week just over $3,100 and is supported there on the short supply of primary aluminum and key alloying hardeners, silicon (Si) and magnesium (Mg).

CRU

The Mid-West premium remains range bound for a fourth week, near $.35/lb. With both the Mid-West premium and the LME showing lower tags through 1H22, not much forward buying is taking place given the uncertainty ahead. As we approach order taking for 2022, current freight rates may push the MWP higher to start the new year, however physical Mg supply issues may offset any upside.

Producers are increasing conversion fees for FRP in steps aligned with the percentage price increase of magnesium, relative to the alloy’s chemistry. Several North American rolling mills have made price announcements increasing conversion fees $.10-$.20/lb either directly or as a proxy for hardener cost pass throughs. North American producers have yet to feel any physical metal supply constraints, utilizing secondary metal sources as feedstock for their Al0Mg alloys. In Europe and in Asia, production is being impacted due to shortage of physical metal units. Mills continue to meet the strong demand requests from all end-use segments despite the higher costs of aluminum and alloy hardeners.

ITC Supports U.S. Producers Antidumping Case

The U.S. International Trade Commission (ITC) has determined the domestic aluminum industry is materially injured by imports of foil from Armenia, Brazil, Oman, Russia and Turkey. As a result of the commissioners’ 5-0 vote, antidumping (AD) duties will be imposed on shipments from those countries and anti-subsidy (CVD) levies on imports from Oman and Turkey.

The product covered is foil up to 0.2 mm thick of any width, in reels exceeding 25 pounds and containing more than 92% aluminum. The five countries’ $239 million worth of imports equaled 13.8% of U.S. consumption last year, according to the commission. Other countries imported $262 million worth of foil and domestic producers shipped $1 billion. The ITC’s decision concludes an investigation carried out at the request of Granges Americas, JW Aluminum and Novelis.

Welcoming the outcome, the Aluminum Association’s Vice-President for Market Growth and Development Ryan Olsen said: “[It] will provide much-needed relief from a second wave of unfairly-traded imports from five countries that hammered domestic producers just as they were beginning to recover from an onslaught of imports from China.

“This decision will help ensure that domestic producers can make full use of the more than $500 million in foil-related capital investments made in recent years. Those investments were made based on the expectation that healthy market conditions would follow from a 2018 decision to apply tariffs on unfair imports from China.”

This ruling is another win for U.S. producers and the Aluminum Association having mounted a series of AD/CVD actions since 2018.

Extrusion Shipment Pace Slows

While YTD and full Y/Y shipment forecast data puts 2021 back on par with the last five-year shipment averages, save of course 2019, September’s shipments indicate deceleration. With September running 2% behind August, extrusion demand despite 20-plus week lead times showed signs of slowing. For the year, extruded shapes and wire-rod-bar remain near 20% ahead of 2020, and pipe and tube applications are 7.6% better Y/Y. The long lead times, higher LME and MW prices and cost pass throughs for freight and alloy hardeners have not yet impacted new order rates, but certainly those factors are on-watch in the near term.

Imported extrusion billet is another item on-watch that may disrupt the supply side of the extrusion industry. With robust demand, any supply shortfall will have immediate impact. Billet supply from eastern Europe and Asia is being tested by long waits at U.S. ports. Recent order delays have jumped from 30-60 days tardy to over 90 days delayed from original promise dates. North American producers are working hand-to-mouth to fill orders as supply draws tight.

(Editor’s note: CRU’s Steve Williamson is filling in for Greg Wittbecker, who is out until Oct. 22 on an extended holiday. Steve can be reached at stephen.williamson@crugroup.com.)

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