Aluminum Prices Steady Amid Global Supply Struggles; LME Declines as Demand Weakens

Key Takeaways

• Price Movement: LME aluminum closed at $2484/mt yesterday, opening today at $2486/mt, with SHFE and MCX also showing stability.
• Global Deficit: Global aluminum production rose 3% YoY in November, but consumption exceeded supply, resulting in a deficit of 332,600 tons.
• China’s Output: China’s aluminum production grew 4.6% YoY in 2024, with exports increasing 17%, contributing to global supply stability.
• Hindalco’s Acquisition: Hindalco secured the Meenakshi Coal Mine to reduce smelting costs and ensure stable coal supply for its operations.
• Market Outlook: Short-term prices may decline due to weak demand, but long-term trends depend on global consumption recovery and US Fed policies.

Aluminum Price:

• As of last day, LME opened at $2491/mt and closed at $2484/mt. Today, LME opened at $2486/mt.
• As of last day, SHFE opened at 19,735 Yuan/mt and closed at 19,745 Yuan/mt. As of today, SHFE opened at 19,730 Yuan/mt.
• As of last day, MCX closed at Rs 240.6/Kg. Today, the market opened at Rs 240.55/Kg.

Aluminum Demand & Supply

• Aluminum prices rose 0.06% to Rs 238.4 due to LME supply concerns. The cash contract discount narrowed to $19/mt, down from $40 in December. LME stocks dropped 40% since May 2023 to 634,650 mt, with 54% in cancelled warrants.
• Global aluminum production grew 3% year-on-year in November to 6.04 million mt, but a market deficit of 332,600 mt persists through October. China’s output rose 3.6% year-on-year in November to 3.71 million mt, with January-November production up 4.6%. Exports increased 17% to nearly 5.5 million mt.

Aluminum News

Hindalco Industries, part of the Aditya Birla Group, secured the Meenakshi Coal Mine in Odisha via a vesting order from the Ministry of Coal. Following the CMDPA signing in November 2024, the mine will help reduce costs and ensure stable coal supply for its smelters, reinforcing Hindalco's position as a low-cost aluminum producer.

Expert Opinion

• On the macroeconomic front, focus is on boosting consumption, while there is growing uncertainty regarding the timeline for interest rate cuts by the US Federal Reserve. On the supply side, despite several aluminum smelters in China reducing production in December and delays in the resumption of some capacity, overall production showed year-on-year growth. On the demand side, market demand has continued to weaken during the off-season, with aluminum processing industry operating rates steadily declining.
• Overall, while supply-side pressures have eased somewhat, weak demand and the risk of inventory accumulation in social stocks remain. In the short term, aluminum prices are expected to experience downward fluctuations. In the long term, attention should be paid to the US Fed's future decisions on interest rate cuts and the recovery of consumption.