Light at the End of the Tunnel
August 2018
In July, the aluminium price outside China averaged US$2,128/t (US96.5ยข/lb), a decrease of 5.5% month on month. Aluminium prices have been on a steady decline since the initial price jump driven by the tariffs and Rusal sanctions put in place by the US in April. Prices steadily declined over July, starting the month at US$2,192/t and ending at US$2,067/t.

There is an apparent light at the end of the tunnel for the Rusal sanctions, with the US government reportedly considering a submission from the company which may lead to it being removed from the sanctions list. While prices have become less volatile and gradually decreased, sustained higher input costs are expected to create a nominal price floor in the absence of significant capacity being brought online. Increased price volatility remains a risk should changes in government policies, both in the US and China, be seen.

LME stocks increased slightly over July, increasing ~80kt to close the month at ~1.2Mt. Stock cover remains at 6.5 days. SHFE aluminium deliverable stocks declined by ~31kt, ending the month at 0.91Mt.

Aluminium prices have started becoming more reflective of production costs following the market adjusting to the initial impact of the tariffs and Rusal sanctions impose by the US. The slow decline in prices may indicate a longer-term market confidence that Rusal will be removed from the sanctions list. Prices will remain sensitive to any developments in trade arrangements between the US and both Europe and China.

Within the alumina sector, prices rose through July and remain buoyed amid the ongoing supply tightness caused by the 50% curtailment of the 6.4Mtpa Alunorte refinery and domestic bauxite supply issues in China. The Australia FOB price averaged ~US$470/t over July, up 2.8% from the June average of US$460/t. Alumina prices finished the month over US$500/t. China’s domestic market price averaged ~US$539/t in July, relatively steady on the back of June’s average.