Testing Times
August 2019
LME stocks marginally increased over July, increasing 0.04Mt to finish the month at ~1.03Mt. This equates to end-of-month stock cover by LME warehouses of 5.6 days. The trend continues the flattening of stock movements following the persistent decline from the GFC. Large inventories outside LME warehouses may contribute to explain the fall in prices despite tightening of apparent stocks.

Indian aluminium producer Vedanta has announced it plans to export up to half its metal production, despite the country’s imports continuing to increase. Imports are predominately from southeast Asian countries as well as China and includes significant volumes of scrap. Imports have offset domestic demand for Vedanta’s metal and seen the company, along with fellow domestic producer Hindalco, call for import tariffs on the material. Through July it was also reported Indian authorities are considering anti-dumping duties on aluminium flat products from South Korea, Vietnam and China.

In early July, global commodity producer and trader Glencore, withdrew from takeover talks for the Aluminij aluminium smelter in Bosnia. The smelter has now been disconnected from the power grid due to accumulated debts the smelter owed to the national power utility and Aluminij has applied for bankruptcy. In late July Alcoa completed the sale of two of its three Spanish smelters in late July. Alcoa had curtailed the Aviles and La Coruna smelters in early 2019 but has confirmed the sale of the smelters to a Swiss private equity firm at the end of July.

The Australia FOB alumina price has also been trading significantly lower as the wider concern of lower aluminium metal demand flows through. Australia FOB is averaged US$311/t, down 11.5% from the June average. The domestic China price as also down 5.9% month on month to average US$412/t in July. While the progressive restart of capacity at Hydro’s Alunorte refinery in Brazil may partially be factored into ex-China alumina price, the additional supply from the full restart, with depressed demand from smelters may see alumina prices remain under pressure.

The European aluminium price averaged US$1,794/t (US81.4¢/lb) through July. Initially increasing in price from the start of the month to a high of US$1,831/t in mid-July before declining again to finish the month marginally above the open at US$1,771/t an increase of 0.3%. The Asian regional aluminium price followed a similar trajectory over the month, averaging US$1,776/t (US80.6¢/lb), but finished the month with a 0.5% decline from the start of the month, closing at US$1,787/t. Prices remain persistently subdued on the back of concerns related to the continued trade tensions between the US and China.