Aluminum
Aluminum
Price movements (monthly)
Aluminum
Month-on-month Change
Year-on-year Change
- Aluminum 3-month prices on the London Metal Exchange (LME) accelerated their growth in July based on high demand and weak supply. Aluminum consumption continued to grow, so prices rose steadily throughout the month.
- The lack of tariff relief in the US for aluminum led to a 25% increase in premiums and an 8% increase in aluminum prices in the US.
- Aluminum inventories at the LME rose in July but remain at low levels, which is driving prices higher.
Aluminum
Price drivers
→ Alumina Prices
LME alumina 3m futures prices were flat m-o-m in July. The global alumina market continues to be under pressure from oversupply. High capacity utilization in China and new capacity in Asia are supporting the market surplus. However, demand remains high, preventing the market from building up significant inventories.
↑ Electricity Price
Growth in industrial consumption was the main driver of electricity price increases in the US and the EU. In addition, the hot July also stimulated increased electricity consumption by households.
The Electricity index Europe rose by 18% m-o-m. US industrial electricity prices rose by 3% m-o-m.
↓ Currencies in Chile and Peru
The currencies of the key base metals suppliers strengthened in July against the US dollar. The Chilean peso strengthened by 4% m-o-m; the Peruvian sol stopped declining and stabilized at the June level. Thus, the fixed costs of mining and metal production increased in Chile and stabilized in Peru.
↓ Logistics
The shipping 40ft container composite упал by 21% m-o-m and 55% y-o-y to $2,620 per unit in July. The bulk of container loading already took place in April–June in anticipation of tariff increases, so demand for transportation declined in July. The peak season turned out to be short and weak, especially for small and medium-sized businesses, which are not prepared to pay higher duties. Despite seasonal growth on routes to Europe and the Mediterranean, excess capacity and logistical restructuring led to a decline in rates from June peaks..
→ Macroeconomic Environment
In the US, inflation accelerated 2.7% on an annualized basis in June, up from 2.4% in May. Energy services, including electricity and piped gas, were the main drivers. In the Eurozone, inflation edged up to 2.0% in June, up from 1.9% in May. In China, inflation was 0.1% y-o-y, up from –0.1% in May and ending the 4-month period of deflation. Sources believe that the acceleration was attributable to recent government stimulus policies aimed at boosting domestic demand against the backdrop of declining export demand due to tariff uncertainty.
↑ Manufacturing PMI
The global manufacturing PMI index returned to growth in June, rising above the 50 point threshold to reach 50.3 points, following three consecutive months of decline. A key driver was the temporary easing of tariff policy in the US, which boosted order volumes and, in turn, production. First and foremost, China's manufacturing PMI rose to 50.4 points in June, up from 48.3 points in May.
Aluminum
Price forecast
The price of LME aluminium is currently in an upward trend, and our analysis suggests that prices could remain high until late 2025. From a fundamental perspective, aluminium is undervalued, and a price increase aligns with the typical seasonal rise we observe in the second half of the year. However, we may experience some temporary fluctuations and volatility in prices.
Our models indicate that an intermediate peak could occur in Q3 of 2025, potentially leading to a brief price pullback before we see further strength towards late 2025. Currently, estimated gross profit levels are above the historical average; therefore, this high profit margin could limit upside potential in the short term, despite LME inventory levels being exceptionally low.
Additionally, global trade uncertainties continue to undermine market confidence, which could also exert downward pressure on prices in the short term. Nevertheless, our analysis indicates that any decline is likely to be temporary, as part of the price volatility that will ultimately lead to another increase in Q4 of 2025. Factors such as depleted inventories, seasonal trends, and technical indicators all suggest further upside potential for LME aluminium prices, which are expected to remain at elevated levels by late 2025.
Aluminum
Market sentiment (for the month ahead)
Mildly Bearish
Market players note the ample supply in the global plastics market, which can more than cater to sluggish demand. Sources do not expect these dynamics to change imminently.
↓ Increasing Supply
Despite the poor demand environment, production levels remain robust globally. The ample availability comes against the backdrop of production outages at certain facilities in the US. Sources noted that international trade between the US and the EU may increase in the coming months following the signing of a trade deal between the two economies, with EU exports of plastics capped at a 15% tariff.
→ Muted Demand
According to market sources, consumer demand is not showing any signs of rising, even during the seasonally higher summertime, when the use of plastic bottles tends to increase. Additionally, longer-term orders are sluggish due to many players being out for the summer holidays. Participants reported that this lack of demand is especially visible in the LDPE, HDPE, and PP markets.
→ Mixed Production Costs
Like last month, production costs remain mixed. Ethylene prices trended strongly upward throughout July to cater for demand from the LDPE and HDPE segments. However, the propylene market remains depressed on tepid demand.
↑ US Weather-Related Concerns
In the US, market sources are increasingly concerned about the prospect of weather-related production outages due to the hurricane season. So far, players have reported a quiet season with little damage but remain vigilant of any future storms.
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