Aluminium
Volatility increases
April 2018
Volatility was due to the market factoring in expectations of increasing supply with China’s winter curtailment policy ending mid-March, as well as reactions to growing trade tensions between China and the US.

Domestic demand in China has recovered after Lunar New Year. Increased demand has been easily filled with the expiration of the Central Government’s 2017-2018 winter pollution controls. Operations curtailed under the policy are progressively resuming full production and increased supply saw the domestic market price decline 1.7% over the month, averaging US$1,868/t (US84.7¢/lb) excluding VAT. AME expects volatility to remain a theme through 2018 with the changing market conditions.

LME stocks resumed their downward trend decreasing by 38kt over March—following February’s sudden influx of 2.43Mt—to close at 1.29Mt, equivalent to 7.5 days of supply. Despite the fall in available aluminium volume in warehouses, the market price fell on the back of capacity restarts in China. The aluminium price closed the month at US$2085, a fall of 5.1% over the month

In general, price volatility has the potential to increase as China’s winter curtailments unwind and trade policies of major economies change. Speculation and market adjustments are expected in the short term as real-world impact of policy changes are realised. Imposition of import tariffs on aluminium by the US government will have broader impacts and may be subject to countermeasures, details of which are yet to be seen.

Within the alumina sector, China’s domestic market stabilised with the easing of previously reported supply shortages as curtailed production comes back online. China’s domestic market price fell 0.9%, averaging ~US$445/t equivalent in March. Conversely, Australia alumina FOB price rose ~US$100/t over March to close at ~US$450/t, a 28% increase. The dramatic price rise was a response to the 6.4Mtpa Alunorte refinery in Brazil issuing a force majeure notice, after government instruction to curtail 50% of production.