This document provides recent and up-to-date information on factors affecting the price of aluminum on the global market, examines production, demand, trade and trade policy as well as competitiveness factors and gives an idea on what we can expect for the Q4 of 2017 and beyond.
Aluminum has been lately at the center of the U.S. policy. The U.S. filed a complaint with the WTO (World Trade Organization) accusing Chinese subsidies to domestic aluminum producers of suppressing global prices of the metal. It was followed by an investigation on the impact of imported aluminum (and steel) as a national security threat. The initiative, has the potential to translate into quotas or tariffs, or both, for imported aluminum which will impact negatively many U.S. industries that have nothing to do with national security. The frontrunners being automotive, the industrial machinery manufacturing, construction, and packaging industries.
The aluminum prices decreased significantly in 2016 but started to rise in the recent months. The source of the problem: Chinese overcapacity. The Chinese government has been struggling since last year, somewhat unsuccessfully, to reduce smelter capacity. The central government’s decision to crack down on overcapacity and polluting smelters saw opposition at local government level where maintaining employment rates and tax revenue was the priority. And, objectively, aluminum inventories in China rose more than 4 times YTD.