CRU Aluminum: LME Gives Up $2,300 Price Point

US Midwest Premiums Still Sluggish Awaiting New Demand

Weak consumer and industrial demand persists across the logistics bandwidth. Fuel prices, too, have not headed higher ahead of the summer season. Consequently, the transit-cost component of the Midwest Premium (MWP) has kept it hovering near $0.25/lb. The current bias is trending lower. Forward order visibility is not overly optimistic and has June’s forward MWP value in backwardation through the balance of Q2 and H2 some trades $0.2325 – 0.24 on little volume that far out.

Also undercutting any firming support, the LME continues to fall away from the $2,300 mark. Now $10 -20/mt below a critical marker, further weakness follows absent any better news on the demand side. Even at these attractive price points, it will take more than price alone to lure buyers back into the market. They will need to see real demand to take new positions.

Buyers are facing absolute zero pressure to place orders deep in H2. Mill lead times are very nearby, 4 – 6 weeks, with only heat-treat plate on allocation given the steady demand from aerospace, semiconductor, and defense application. Packaging, construction, and general fabrication orders have yet to see any seasonal lift from warmer, longer days. Volatility remains low, and as such, favors the buyers’ short positions.

Prices for Mill and Packaging Scrap Remain Subdued

Demand for packaging has been hit by two factors: the high level of stocks at can-makers and the weaker end-consumer demand due to inflation. At the start of Q2 there was hope that demand could pick up as the destocking phase comes to an end, and the quarter usually sees a seasonal boost in can production.

Demand has not picked up substantially as can-makers are still running high on stocks and the views on consumption for the summer remain bearish despite word of in-store promotions returning to prompt beverage sales. As a result, aluminum semis demand has been lower and scrap generation naturally following that trend.

One last grade of scrap closely linked to construction activity is extrusions scrap, which has remained at flat to the LME since October last year. As extruders are still running at reduced capacity, less scrap is returning to the market, and we have been told that availability of extrusions scrap is tight. The fact that prices are not reacting to this is clearly a sign that demand remains weak, and it is not expected to pick up any time soon given the widespread maintenance closures over the summer. 

CRU’s World Aluminum Conference Focused on Sustainability and Decarbonization

CRU’s 28th World Aluminum Conference in London attracted key industry leaders from around the world.

Decarbonization strategies were shared by industry leaders from companies such as Alba, Alcoa, CBA, Hindalco, Ma’aden, and Rio Tinto. The panel discussed each company’s goals, implementation strategies and challenges they face going forward. It was clear from the discussion that decarbonization requires a holistic approach, joint effort and commitment from industry leaders. Hindalco also raised the important point for adapting sustainability efforts that needed to include goals encompassing water and deforestation.

Novelis emphasized that recycling is the key to aluminum when it comes to competition with other materials, as aluminum tends to a have a lower carbon footprint. The perspective also outlined that end-of-life scrap collection needs to be improved in all end-use segments, outside of beverage cans, and that public policy plays a big role to help improve secondary metals recovery.

CRU Economics Team delivered an overview of global macroeconomic conditions. China’s Q1 GDP growth was driven by infrastructure and service spending, with consumption leading the recovery, but the property sector still shows a mixed picture in terms of its recovery. Following the sanctions on Russia, there has been a reconfiguration of trade flows, with strong primary aluminum from Russia to China. In Europe, the gap between production and new orders has cleared but the service sector is still strong, which is keeping the labor market tight, as in the US.

The CRU Battery Metals Team touched on the growth opportunity for aluminum products within the electric vehicle (EV) market and how China will remain the largest BEV producer. The panel of guests discussed prices and demand outlook going forward, with the general consensus being soft prices in the short term as the market works through external shocks like the banking crisis and inflation. However, higher prices are expected by year-end.

Greater transparency and disclosure surrounding ESG practices and ESG data will help settle greenwashing debates. The LME explained how the demand for transparency was not just coming from the supply chain but also from the buyers community. We also heard how CRU’s Emission Analysis tool uses data to create actionable intelligence.

A US Department of Commerce representative presented the Aluminum Import Monitoring (AIM) tracking system. Given the recent 200% tariff on Russian imports and other antidumping and countervailing duties (AD/CDV) issues emanating from the US, the international audience was very engaged to have this firsthand view of US Policy.

Learn more about CRU’s services at www.crugroup.com

By Stephen Williamson, CRU Research Manager, stephen.williamson@crugroup.com