CRU aluminum: Challenges ahead as 2024 kicks off

Written by Matthew Abrams

The LME three-month price was moving down again on the morning of Jan. 12 and was last seen trading at $2,215 per metric ton (mt). We expect a test of the $2,200/mt support to be imminent. A break would be bearish as it could mean a complete reversal of the gains seen in December, although we still estimate that as being unlikely.

SHFE cash was also broadly stable again on Friday. The cash contract settled at RMB19,065/mt and last traded at RMB19,080/mt.

Aluminum Association order index offers little optimism

According to the latest “Index of Net New Orders of Aluminum Mill Products” released by the US Aluminum Association (AA), total orders in December 2023 were down 0.8% compared to December 2022. This is worse than the 0.2% year-over-year (y/y) growth reported in November.

New orders for heat-treatable sheet, which contain the 2xxx, 6xxx and 7xxx series alloys – popular in automotive and aerospace applications – as well as for plate and extruded products were the most impacted in December. Indeed, new orders for heat-treatable sheet moved from growth of 3.9% y/y in November to a contraction of -11.4% y/y in December. New orders for plate went from a 25% y/y growth in November to only +0.2% in December. As for extruded products, they moved back to a contraction of -3.2% y/y, breaking a steady recovery that started in August last year.

Among the products that performed better in December, new orders for non-heat-treatable sheet, which include the 1xxx, 3xxx and 5xxx series alloys, improved from a contraction of -0.4% y/y in November to a growth of 7% y/y in December. Domestic can stock and export can stock also moved back to a growth of 0.8% y/y and 16.6% y/y in December, respectively. Finally, new orders for foil improved last month but remained down -17.7% y/y versus -39.1% y/y in November.

Share of Russian metal on LME increases to 90%, latest data shows

According to the latest country-of-origin stock data published by the LME and covering the month of December, total Russian stocks on the LME increased by 119% month-over-month (m/m) to 338,375/mt. With a total of 374,250/mt of open warrants, this means that the share of Russian metal on the LME has now reached 90%.

The move comes after 171,000/mt of aluminum got delivered into LME warehouses in December. 32,375/mt were delivered into Port Klang, Malaysia; 65,500/mt into Gwangyang, South Korea; and 72,900/mt into Kaohsiung, Taiwan. Market feedback suggests that these inflows are linked to the UK’s decision last month to ban its citizens from acquiring Russian metal – a move that is making people increasingly nervous about holding Russian inventory.

Chinese exports improve in late 2023, but Red Sea hostilities raise concerns

In December, China exported 490,500/mt of unwrought aluminum and products, an increase of 0.2% m/m and up 4% y/y. Even if Chinese exports finished the year stronger, they remain down 14% y/y for 2023.

Some fabricators have reported improving exported orders to us in December, mainly due to clients placing orders forward before the Chinese New Year holiday. However, the situation in the Red Sea has resulted in a sharp increase in freight rates from Asia to Europe. This might impact the level of exports going forward. 

Aluminum rod plant inaugurated in Bahrain

UK-based Conexus has officially begun operating a 32,000/mt-per-year aluminum rod mill in Bahrain to serve industrial customers worldwide. The new plant, which cost $100 million to build, meets government policy to diversify the economy, with aluminum viewed as one of the five priority, non-oil sectors. Plans include development of an aluminum downstream industrial estate, local media reported. Feedstock material for the new mill, called Konexus Aluminium, is from Bahrain’s Alba aluminum smelter.

The London-headquartered Conexus Resources Group is a global trader in metals (aluminum, copper, lead, heavy-melting scrap steel, and energy-transition metals) and agricultural products.

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