Base metal prices have traded weakly for the most part in 2015. Concerns over the Chinese economy and perennial oversupply have weighed heavily on base metal prices. In August 2015, copper and aluminum hit their 6.5-year lows. The month saw China devaluing its currency twice in the span of two days.
China’s August flash PMI (purchasing managers’ index) released on August 21, 2015, also came in at a 77-month low of 47.1. Then came the crash in the Chinese stock markets on August 24 that drowned all base metals.
However, base metals (DBB) consolidated thereafter. Spot aluminum closed at $1,640 per metric ton on September 11, 2015, while spot copper closed at $5,352 per metric ton on the same day.
Since then, aluminum’s performance has digressed from copper, as can be seen in the graph above. Aluminum was among the worst-performing base metals in October 2015. Spot aluminum prices were down more than 7.5% in October, while spot copper and zinc gained roughly 1% in the month.
Copper gained on supply cuts announced by companies including Anglo American, Glencore, and Freeport-McMoRan, while zinc was buoyed by Glencore’s capacity curtailments.
However, November has been a good month so far for aluminum. Spot aluminum closed at $1,509 per metric ton on November 6, 2015. So far in November, aluminum has gained more than 4%. Copper and zinc have lost ~3% each in November. Stock prices of copper producers including Southern Copper (SCCO) and Teck Resources (TCK) have traded weakly in November.
In this series, we’ll explore what factors are driving the current uptrend in aluminum prices. We’ll also look at the aluminum exposures of different mining companies. This should help you understand how to play the possible recovery in aluminum prices.