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Aluminum Highlights

Week Ending: September 11, 2020An update on industry activity and economic indicators

Prices consolidated around $1,750 per metric ton on the LME last week, reaffirming the sideways move in the market since the start of the month. Chinese aluminium demand remains strong as we enter the fourth quarter, however, traditionally a good period for consumption. Chinese imports of refined (unwrought) aluminium are on a pace to be the highest in a decade, flipping the country’s trade balance in primary metal from a net exporter to importer. This shift reflects an unusually wide ‘Shanghai Arb’, which is acting like a magnet, drawing aluminium from the rest of the world and supporting the LME price and helping to lift regional premiums. Chinese production is itself at a record level and may grow by more than three percent in 2020.

There is question about where all this metal is going even with the Chinese economy performing well. Globally, IHS Markit’s market balance for 2020 still shows a large surplus of more than 3 million metric tons this year even with an upward revision to our consumption outlook. Visible inventory – now including reported metal in LME affiliated warehouses -- has moved higher since February, but by nowhere near the amount our surplus calculation might indicate. The suspicion is that off exchange warehouse inventory is growing by a large amount. There are also hints that inventory throughout the aluminium supply chain has risen, in part as a precautionary measure against potential disruptions this fall should a COVID second wave appear.

The other curious feature of the market right now is open interest. It has declined by more than 30% on both the LME and Shanghai Futures Exchange since June. Normally in a buoyant market with prices rising, one would expect to see open interest rise as investors ‘go long’. Declining open interest suggests that part of the recent rise in prices stems from short covering, which makes sense in the current environment. This said, we find the lack of a more bullish narrative behind the market – at least as can be gleaned from open interest data – interesting. We believe it reflects the fact that despite better than expected consumption given the pandemic, the market cannot be described as physically tight, except for certain products like can stock. The lack of tightness opens the possibility that the market could hit a soft patch should demand falter

Market ViewBy: John Mothersole, Director of Research, Pricing and Purchasing Service – IHS Markit

The views expressed in the “Market View” are those of the author and do not necessarily represent the views of the Aluminum Association

This report is based on information reported to the Association by participants, which is aggregated by the Association. While the Association believes that its statistical procedures and methods are reliable, it does not warrant the accuracy or completeness of the data. All data contained herein are subject to revision. For further information, contact Ryan Olsen, V.P. Business Information and Statistics at 1-703-358-2984 or email rolsen@aluminum.org. © The Aluminum Association, Inc. All rights reserved.

The Aluminum Association

2Industry Activity

September 11, 2020

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130

Mill Products Order Receipts(Index 2013=100)

NNO Index 3 Mo. Moving Avg.

The Aluminum Association Not Seasonally Adjusted

September 9 – The Association’s “Index of Net New Orders of Aluminum Mill Products” for August 2020 increased 7.2 percent over July 2020. Orders for flat roll products (sheet, plate, can stock and foil) rose 8.0 percent over the previous month, while orders for extruded products were up 2.4 percent and orders for redraw rod increased 13.7 percent. Compared to August 2019, total orders rose 3.1 percent. On average, orders recorded by domestic producers through August 2020 were down 11.3 percent from year-to-date 2019.

September 10 – The Aluminum Association, in cooperation with the Aluminium Association of Canada, reported primary aluminum production in North America (U.S. and Canada) was at an annual rate of 4,142,541 tonnes during August 2020, an increase of 43,979 tpy (+1.1%) from the July 2020 rate of 4,098,562 tonnes. The production rate in the U.S. decreased 2.3 percent, while it increased 2.1 percent m/m in Canada. Compared to a year ago, the North American annual rate was 4.9 percent above the August 2019 rate of 3,949,088 tonnes. Actual production in August 2020 totaled 350,871 tonnes.

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3,800

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North America Primary Aluminum Production(Annual Rate in Thousands of Metric Tons)

The Aluminum Association & Aluminum Association of Canada Not Seasonally Adjusted

US 12-mo.

Can. 12-mo.

September 10 – Shipments of can stock by domestic producers totaled 333.7 million pounds during August 2020, a rise of 4.4 percent over the August 2019 total of 319.5 million pounds. Compared to the previous month, shipments increased 4.5 percent over the July 2020 total of 319.2 million pounds. Year-to-date shipments though August 2020 totaled 2,524.9 million pounds, up 1.0 percent over the 2019 year-to-date total of 2,498.9 million pounds.

Compared to August 2019, producer shipments of can stock to U.S. markets increased 5.9 percent to 313.2 million pounds, while exports decreased 14.1 percent to 20.5 million pounds.

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Can Stock Shipments2019 2020*

The Aluminum Association Not Seasonally Adjusted

Millions of Pounds

The Aluminum Association

3Economic Activity

September 11, 2020

September 9 – According to the U.S. Bureau of Labor Statistics, the number of job openings increased to 6.6 million (+617,000), while the job openings rate increased to 4.5 percent, on the last business day of July. Separations in the manufacturing sector decreased 9.9 percent from June, but were 8.6 percent above the level a year ago. Manufacturing openings rose by 17.9 percent over the previous month, but declined 14.5 percent from July 2019. The spread between hires and separations in manufacturing fell into negative territory (-32k), as July hires were an estimated 321 thousand (-25.7% m/m), while separations totaled 353 thousand.

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SOURCE: U.S. BUREAU OF LABOR STATISTICS/FRED

U.S. Manufacturing Job Openings and Labor Turnover (Thousands)

Openings Hires Separations

September 8 – According to the most recent DAT Trendlines release (August 31 – September 6), the average linehaul rate for dry van freight set an all-time record high in August. National average freight rates increased by +18¢ and +9¢ for vans and flatbeds, respectively. That momentum continued last week, with shippers and freight brokers paying higher prices to move freight ahead of the Labor Day weekend. Meanwhile, monthly load-to-truck ratios for flatbeds increased 9.6 percent m/m in August (31.5), while the van ratio rose 20.8 percent (5.31).

September 9 – Canadian housing starts increased 6.9 percent in August m/m, at a seasonally adjusted annual rate (SAAR) of 262,396 units according to the Canadian Mortgage and Housing Corporation (CMHC). This followed an increase of 15.1 percent in July (revised). The six-month moving average (213,144) advanced for the third consecutive month. The SAAR of urban starts rose to 248,154 in August, 7.1 percent above the July rate. Multiple urban starts advanced 9.1 percent (201,214 units), while the single-detached urban starts segment fell 1.0 percent to 46,940 units m/m.

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Canadian Housing Starts(thousands of units)

Housing Starts 6-mo Trend

Canada Mortgage and Housing Corporation Seasonally Adjusted Annual Rate

The Aluminum Association

4Economic Activity Continued…

September 11, 2020

September 10 – The Producer Price Index for final demand (which includes goods and services) rose three-tenths of one percent in August, seasonally adjusted, the U.S. Bureau of Labor Statistics reported. Final demand prices increased six-tenths of one percent in July, and fell two-tenths of one percent in June. The index for final demand goods increased one-tenth of one percent, while final demand goods less food and energy rose three-tenths of one percent m/m. On an unadjusted basis, the final demand index decreased two-tenths of one percent for the 12 months ended in August.

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2.0%Monthly Change in Selected PPI Indexes

Final Demand

Final Demand Goods

Final Demand Goods (Less Food & Energy)

Bureau of Labor Statistics Seasonally Adjusted

September 11 – The U.S. Consumer Price Index for All Urban Consumers (CPI-U) rose four-tenths of one percent in August on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported. This followed an increase of six-tenths of one percent the previous month. The core consumer price index (all items less food and energy) also increased four-tenths of one percent (rounded) after advancing six-tenths of one percent the previous month. Over the last 12 months, the all items index advanced 1.3 percent, while the core price index has increased 1.7 percent over the same period.

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U.S. Consumer Price IndexAll Urban Consumers (CPI-U)

All items All items less food and energy

Bureau of Labor Statistics Seasonally Adjusted

Global Activity

September 8 – Seasonally adjusted GDP decreased by 11.8% in the euro area and by 11.4% in the EU compared with the previous quarter, according to an estimate published by Eurostat, the statistical office of the European Union. These were by far the sharpest declines observed since the time series started in 1995. In the first quarter of 2020, GDP had decreased by 3.7% in the euro area and by 3.3% in the EU.

Compared with the same quarter of the previous year, seasonally adjusted GDP decreased by 14.7% in the euro area and by 13.9% in the EU in the second quarter of 2020, after -3.2% and -2.7% respectively in the previous quarter.

The Aluminum Association

5Energy

September 11, 2020

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Crude Oil Near-Month Futures (WTI & Brent)(U.S. dollars per barrel)

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CME Group Inc.

September 11 – On the NYMEX, the near-month WTI crude oil futures (Cushing, OK WTI Future Contract 1) closed the week at $37.33/bbl on Friday, September 11, down $2.44 (-6.1%) from last Friday's close of $39.77/bbl. U.S. oil futures suffered from a second consecutive weekly decline on Friday, pressured by worries over the outlook for demand and a climb in U.S. crude supplies. Meanwhile, the EIA reported an increase in domestic crude supplies for the first time in seven weeks. Active U.S. oil-drilling rigs fell by 1 (180) this week, the second weekly decrease in the last 3 weeks. From the level a year ago, rigs were off 553. Brent Crude on London's ICE Futures exchange decreased to $39.83/bbl (-6.6%). Friday's spread between the two was $2.50/bbl, down from last week's spread of $2.89/bbl.

September 10 – The U.S. Energy Information Administration (EIA) reported that natural gas spot prices remained flat at $2.19 per million British thermal units (MMBtu).

At the New York Mercantile Exchange (Nymex), the price of the October 2020 contract decreased 8¢, from $2.486/MMBtu last Wednesday to $2.406/MMBtu. The price of the 12-month strip averaging October 2020 through September 2021 futures contracts declined 1¢/MMBtu to $2.964/MMBtu.

The Aluminum Association

6U.S. Dollar

September 11, 2020

September 4 – According to the most recent release by the Federal Reserve Board, the Trade Weighted U.S. Dollar Index closed at 116.38 on Friday, September 4, a decrease of six-tenths of one percent from last week's level of 117.05. The Index has now declined in three of the last four weeks. The weekly decrease resulted in the Index remaining below it's 30-day moving average for the tenth straight week. Over the last six months, the Index has decreased four-tenths of one percent, while it has decreased 1.0 percent over the last 12 months.

The Trade Weighted U.S. Dollar Index is a weighted average of the foreign exchange values of the U.S. dollar against the currencies of a broad group of major U.S. trading partners.

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7.20Chinese Yuan to US Dollar

Chinese Yuan to One U.S. Dollar

30 Day Moving Avg.

Federal Reserve Board

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1.50Canadian Dollar to US Dollar

Canadian Dollars to One U.S. Dollar

30 Day Moving Avg.

Federal Reserve Board

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Japanese Yen to One U.S. Dollar

30 Day Moving Avg.

Federal Reserve Board

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1.20US Dollar to Euro

U.S. Dollars to One Euro

30 Day Moving Avg.

Federal Reserve Board

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Trade Weighted U.S. Dollar Index: Broad, Goods and Services(2006 = 100)

Trade Weighted U.S. Dollar Index

30 Day Moving Avg.

Federal Reserve Board

The Aluminum Association

7The Aluminum Association, founded in 1933, works globally to aggressively promote aluminum as the most sustainable and recyclable automotive, packaging and construction material in today’s market. The Association represents North America and foreign-based primary producers of aluminum, aluminum recyclers, producers of semi-fabricated products and foundries as well as suppliers to the industry or distributors or jobbers.

The Aluminum Association's statistical programs provide industry information on primary aluminum production, new orders of mill products, industry shipments, end use market estimates, inventories, recycling and foreign trade on a monthly, quarterly and annual basis. Special surveys provide data on specific subjects such as primary capacity, flat roll capacity, inventories and castings shipments. Custom reports are available on a for-fee basis. Web briefings are also available upon request.

Industry OverviewAluminum Statistical Review (Annual Fact Book)Aluminum Highlights (Weekly)Aluminum Situation (Monthly)Summary of Producer Shipments and Inventories (Monthly)

Primary AluminumPrimary Aluminum Production – U.S. and Canada (Monthly)Primary Installed Capacity (Annual)Shipments of Primary Aluminum by Form (Quarterly)

Mill ProductsIndex of Net New Order Receipts for Aluminum Mill Products (Monthly)Can Stock Shipments (Monthly)Extruded Products Shipments and Press Utilization (Monthly)Flat Roll Capacity (Annual)Forging and Impacts Shipments (Monthly)Rod, Bar, and Wire Shipments (Monthly)Sheet and Plate Shipments (Monthly)

End UseExtrusion Shipments by End Use (Quarterly)Fin Stock Shipments by End Use (Quarterly)Foil Shipments by End Use (Monthly)Sheet and Plate Shipments by End Use (Quarterly)

CastingsU.S. Foundry Castings Shipments (Quarterly)Canada Foundry Castings Shipments (Annual)

RecyclingNew Can Stock (Class) Scrap Receipts (Monthly)Used Beverage Can Reclamation (Annual)

Foreign Trade (based on government customs data)Summary of North American (U.S. & Canada) Imports and Exports by Commodity (Monthly)U.S. Import Dashboard (Monthly)U.S. Aluminum Import Monitor - Section 232 (Monthly)Foreign Trade Online Database - U.S., Canada and Mexico Exports & Imports of Aluminum (By Commodity, by Country)

For a complete list of statistical publications and reports visit our bookstore.

September 11, 2020