May was one of the worst months for the aluminum industry. Aluminum prices and physical premiums took a severe beating during the month. The aluminum industry’s fundamentals have been weak for quite some time now.
The aluminum industry’s fundamentals are getting worse. This is visible in aluminum companies’ share prices. The above chart shows aluminum plays’ recent stock market performance. Recently, Alcoa (AA) touched its 52-week low. It continues to trade weak. Together, Alcoa and RTI Metals (RTI) account for 4.4% of the SPDR S&P Metals and Mining ETF (XME).
Century Aluminum (CENX) has lost more than half of investors’ wealth this year. Along with general pessimism in the aluminum industry, Century Aluminum is grappling with several operational challenges.
The performance of European major Norsk Hydro (NHYDY) hasn’t been any better. It’s also trading near its 52-week low.
What do we cover in this series?
In this series, we’ll analyze the recent aluminum industry indicators. We’ll also discuss how aluminum demand is shaping up in the US.
Surprisingly, aluminum demand is expected to be strong this year. In contrast the demand for steel is only expected to grow modestly. There are also concerns about copper demand. It has substantial exposure to China’s beleaguered real estate sector.
Aluminum’s supply has also been disciplined. Most producers, with the exception of China, have cut down on their capacity. However, despite all of these factors, aluminum has been weak on the LME (London Metals Exchange). Aluminum prices had one of their worst monthly falls in May. In the next part of this series, we’ll discuss the correction in aluminum prices in May in more detail.