Aluminium
LME Metal Stocks Continue Decline, while SHFE Increases
September 2017
LME spot aluminium prices are at their highest point since 2014. Total LME stockpiles have continued a 4-year decline while SHFE stocks reach new high. Alumina prices were relatively stable throughout July, and closed the month on a high.

Aluminium Price Range Narrows

LME aluminium spot prices averaged US$2,030/t (US$0.92/lb) in August an increase of 5.7% on the July average of US$1,903/t. The range of the LME spot price over the month was wide, with prices ranging from US$1,884/t up to US$2107/t and closing at US$2,099/t. The average Midwest aluminium premium was US$0.076/lb for August, up from US$0.072/lb in July.

The combined stocks reported on the major exchanges (LME and SHFE) increased by 0.9% to 1.83Mt at the end of August. The rise in total stock was driven by a 10.4% increase in SHFE stocks only being partially offset by a 2.3% reduction in reported LME warehouse stocks. At the end of the month, the LME stocks had reached a new nine-year-low position at 1.32Mt continuing an almost 4 year decline. The US and European LME warehouse stocks declined 14kt and 22kt respectively, offsetting a slight increase of 5.8kt at LME’s Asian warehouses. On the other hand, SHFE deliverable stocks have reached its highest level since March 2013.

 

Policies Affecting Aluminium Smelting Capacity Impact Alumina and Bauxite Markets

Alumina prices, FOB Australia , were relatively steady through July in a range of US$304-315/t and averaging US$308/t throughout the month, similar to July but rising 2.7% in the last week to finish the month at the high of US$315/t. The current price stability is believed to be due to a wait-and-see attitude to what the eventual true impact on both refinery and smelter production capacity turns out to be as Chinese capacity curtailments are implemented. Price support is also provided by China’s domestic bauxite uncertainty.

The reliable sourcing of suitable bauxite in China continued to be difficult from the historically important bauxite producing provinces such as Shanxi, with uncertainty over the impact of environmental policies. Environmental inspections have already been linked to some mine curtailments, but quality issues and the higher energy requirements to process them have also been a factor. Seaborne bauxite to China from Guinea continues to increase.