10
Follow us on: In September, LME aluminium dropped 1%, slightly outperforming the LMEX (-2.9%). The resilience of LME aluminium was probably due to tighter fundamentals, as evidenced by the strong fall of 146,375 tonnes or 13% in available inventories. But this was not sufficient to offset headwinds stemming from 1) the broad-based deterioration in sentiment across the entire base metals complex; and 2) the strong increase in aluminium SHFE stocks (pointing to a loosening supply/demand balance in China). Metal Bulletin’s 32nd International Aluminium Conference, which took place in Bahrain at the end of September, revealed that the vast majority of market participants were bullish on aluminium on the back of tighter fundamentals. Demand growth is set to be led by the robust auto sector while supply growth should slow as a result of supply cuts in China. Although Chinese markets are on holiday for the past week, daily volumes traded in the LME aluminium market are robust. But judging by the fall in open interest over the past two trading sessions, it seems that the LME aluminium strength is driven by short-covering rather than fresh buying. The tightening in nearby spreads corroborates this view. London Metal Exchange aluminium stocks have been drifting lower since early September; a stronger contango has halted inflows. Outflows averaged 3,459 tonnes per day (tpd) in September-October compared with 5,925 tpd in August. Currently 20% of stocks are booked for removal, compared with 22% on September 22 following a small re-warranting. Stocks are also tightly held – one entity holds 39% of warrant positions. Aluminum Highlights Week Ending: October 6, 2017 An update on industry activity and economic indicators Market View 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 [email protected] . © The Aluminum Association, Inc. All rights reserved. By: Yang Cao , CFA, Senior Analyst Metal Bulletin Research The views expressed in the “Market View” are those of the author and do not necessarily represent the views of the Aluminum Association

Market View - The Aluminum Association · 2017-10-06 · The Aluminum Association Economic Activity 3 September 21 –Preliminary data published by Ward's Automotive show that North

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Page 1: Market View - The Aluminum Association · 2017-10-06 · The Aluminum Association Economic Activity 3 September 21 –Preliminary data published by Ward's Automotive show that North

Follow us on:

In September, LME aluminium dropped 1%, slightly outperforming the LMEX (-2.9%). The resilience of LME aluminiumwas probably due to tighter fundamentals, as evidenced by the strong fall of 146,375 tonnes or 13% in available inventories. But this was not sufficient to offset headwinds stemming from 1) the broad-based deterioration in sentiment across the entire base metals complex; and 2) the strong increase in aluminium SHFE stocks (pointing to a loosening supply/demand balance in China).

Metal Bulletin’s 32nd International Aluminium Conference, which took place in Bahrain at the end of September, revealed that the vast majority of market participants were bullish on aluminium on the back of tighter fundamentals. Demand growth is set to be led by the robust auto sector while supply growth should slow as a result of supply cuts in China.

Although Chinese markets are on holiday for the past week, daily volumes traded in the LME aluminium market are robust. But judging by the fall in open interest over the past two trading sessions, it seems that the LME aluminiumstrength is driven by short-covering rather than fresh buying. The tightening in nearby spreads corroborates this view.

London Metal Exchange aluminium stocks have been drifting lower since early September; a stronger contango has halted inflows. Outflows averaged 3,459 tonnes per day (tpd) in September-October compared with 5,925 tpd in August. Currently 20% of stocks are booked for removal, compared with 22% on September 22 following a small re-warranting. Stocks are also tightly held – one entity holds 39% of warrant positions.

Aluminum Highlights

Week Ending: October 6, 2017An update on industry activity and economic indicators

Market View

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 [email protected]. © The Aluminum Association, Inc. All rights reserved.

By: Yang Cao, CFA, Senior Analyst – Metal Bulletin ResearchThe views expressed in the “Market View” are those of the author and do not necessarily represent the views of the Aluminum Association

Page 2: Market View - The Aluminum Association · 2017-10-06 · The Aluminum Association Economic Activity 3 September 21 –Preliminary data published by Ward's Automotive show that North

The Aluminum Association

2Industry Activity

September 27 – Preliminary estimates indicate that aluminum demand in the United States and Canada (shipments by domestic producers plus imports) totaled an estimated 16,013 million pounds through the first seven months of 2017, up 4.2 percent over the same period last year. Demand for semi-fabricated (mill) products totaled 11,612 million pounds, up 6.0 percent. Apparent consumption (demand less exports) in domestic markets totaled an estimated 14,295 million pounds, up 5.2 percent year-over-year.

October 6, 2017

September 28 – The U.S. aluminum industry purchased an estimated 732 million pounds of aluminum scrap during July 2017, according to aluminum recycling statistics published by the U.S. Geological Survey, Department of Interior, up nine-tenths of one percent from the July 2016 total of 725 million. USGS estimates that recovery of aluminum and aluminum alloys totaled 668 million pounds, an increase of 1.6 percent year-over-year. Through the first seven months of 2017, preliminary data indicate that recovery of aluminum from scrap totaled an estimated 4,718 million pounds, up 2.5 percent over the 2016 ytd total of 4,603 million pounds. U.S. exports of scrap, not included in the government’s consumption statistics, totaled 1,907 million pounds through July, up 13.4 percent over 2016.

September 28 – Aluminum net shipments (including exports) by domestic U.S. and Canadian facilities totaled an estimated 2,100 million pounds during August, off 2.1 percent from the August 2016 total of 2,142 million pounds. Shipments of aluminum mill products increased four-tenths of one percent over the previous year to 1,419 million pounds, while shipments of aluminum ingot for castings, exports and destructive uses were off 6.6 percent year-over-year, totaling 681 million pounds. Through the first eight months of 2017, preliminary producer shipments totaled 16,066 million pounds, up 1.4 percent over year-to-date 2016. August inventory levels totaled an estimated 3,070 million pounds, up 2.7 percent over the previous month and an increase of 3.6 percent year-over-year.

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The Aluminum Association

3Economic Activity

September 21 – Preliminary data published by Ward's Automotive show that North American (Canada, Mexico, and the United States) light vehicle production totaled 1.53 million units during August 2017, off 8.5 percent year-over-year. Production in the U.S. fell 13.2 percent y/y to a total 980,918 units , the lowest August total since 2013. Production in Canada slowed 9.0 percent to 195,262 units for the month, while Mexican production was again the exception, increasing 8.0 percent y/y. Production of medium and heavy trucks totaled 35,564 units in August, up 9.9 percent over a year ago. For the first eight months of 2017, total production reached 11.5 million units, off 2.8 percent from ytd 2016. Year-to-date U.S. production through July declined 7.1 percent, while Mexican and Canadian production was up 13.7 and off 4.4 percent, respectively.

October 6, 2017

September 26 – Sales of new single-family housesin August 2017 were at a seasonally adjusted annual rate of 560,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.4 percent below the revised July rate of 580,000 and is 1.2 percent below the August 2016 estimate of 567,000. The median sales price of new houses sold in August 2017 was $300,200. The average sales price was $368,100.

September 28 – U.S. real gross domestic productincreased at an annual rate of 3.1 percent in the second quarter of 2017 according to the "third" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.2 percent. BEA emphasized that the second-quarter third estimate released today is based on more complete source data than were available for the "second" estimate issued last month (+3.0%). The acceleration in real GDP in the second quarter reflected an upturn in private inventory investment, an acceleration in PCE, a deceleration in imports, and an upturn in federal government spending that were partly offset by a downturn in residential fixed investment, a deceleration in exports, and a downturn in state and local government spending.

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The Aluminum Association

4Economic Activity Cont…

September 29 – Statistics Canada report that Canada’s Industrial Product Price Index (IPPI)increased three-tenths of one percent in August (112.1), after decreasing 1.6 percent in July (r). The main reason for the increase was higher prices for energy and petroleum products (+2.8%). The IPPI excl. energy and petroleum products was off one-tenth of one percent. Alumina and aluminum production prices increased 2.6 percent from July, and are up 11.6 percent over a year ago. The overall IPPI rose 1.9 percent during the 12-month period ending in August, after posting a 1.3 percent increase in July.

October 6, 2017

September 29 – Statistics Canada report that real GDP in Canada, after rising for eight consecutive months, was essentially unchanged in July . The output of goods-producing industries contracted five-tenths of one percent, the first decrease in five months. Services-producing industries increased two-tenths of one percent. Total manufacturing output decreased four-tenths of one percent. Durable-goods manufacturing fell nine-tenths of one percent, following four months of growth. The largest contributor to the decline was a 5.6 percent decrease in the transportation equipment manufacturing subsector.

October 2 – The U.S. Census Bureau of the Department of Commerce reported that the annual rate of construction spending during August 2017 totaled an estimated $1,218.3 billion, seasonally adjusted, an increase of five-tenths of one percent month-over-month, and up 2.5 percent over the August 2016 estimate of $1,189.1 billion. Residential construction ($526.5 billion seasonally adjusted annual rate) increased five-tenths of one percent month-over-month, and 11.3 percent year-over-year. Nonresidential construction was at a seasonally adjusted annual rate of $691.8 billion in August, up five-tenths of one percent over July 2017 (-3.4% y/y). Construction spending through August 2017 amounted to $806.2 billion, 4.7 percent above the $769.9 billion ytd in 2016.

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The Aluminum Association

5Economic Activity Cont…

October 3 – Preliminary data published by Ward's Automotive show that actual U.S. light vehicle salestotaled 1.52 million units during September 2017, up 6.0 percent year-over-year. The daily sales rate in September was 58,298 over 26 days, 1.9 percent above the 2016 rate of 57,188 (25 days). Through the first three quarters of 2017, sales totaled 12.801 million units, 1.9 % below like-2016’s 13.046 million. September’s seasonally adjusted annual rate of 18.5 million units ended a 6-month streak of sub-17 million figures and topped 18 million for only the second time since the industry exited the recession in 2009. In same-month 2016, the SAAR reached 17.6 million. The year-to-date SAAR stood at 16.9 million units, down from 17.3 million in 2016.

October 6, 2017

October 5 – The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that total August exports of $195.3 billion and imports of $237.7 billion resulted in a trade deficit of $42.4 billion, down 2.7 percent from the revised July deficit of $43.6 billion. Exports during August were $0.8 billion (+0.4%) more than the revised July total of $194.5 billion, while imports were $0.4 billion (-0.1%) less than the revised July total of $238.1 billion. The exports of goods, up $0.6 billion over the previous month, were largely responsible for the decrease in the overall deficit. Year-to-date, the trade deficit increased $29.1 billion, or 8.8 percent, over 2016. Exports increased $84.9 billion (+5.8%), while imports increased $114.0 billion (+6.4%).

October 5 – New orders for manufactured durable goods in August, up two of the last three months, increased $4.5 billion or 2.0 percent to $233.5 billion, as reported by the U.S. Census Bureau. This followed a 6.8 percent July decrease (revised). Transportation equipment, also up two of the last three months, led the increase (+5.1%). Excluding transportation equipment, August new orders for manufactured durable goods were up five-tenths of one percent m/m. The value of manufacturer's shipments increased five-tenths of one percent m/m, while inventories increased four-tenths of one percent in August.

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The Aluminum Association

6Economic Activity Cont…

October 5 – In the week ending September 30, the advance figure for seasonally adjusted initial claimswas 260,000, a decrease of 12,000 from the previous week's unrevised level of 272,000. The 4-week moving average was 268,250, a decrease of 9,500 from the previous week's unrevised average of 277,750. Hurricanes Harvey, Irma, and Maria impacted this week's claims.

An initial claim is a claim filed by an unemployed individual after a separation from an employer.

October 6, 2017

October 6 – Total nonfarm payroll employment decreased by 33,000 in September, impacted by both Hurricane Harvey and Hurricane Irma, the U.S. Bureau of Labor Statistics reported. The unemployment rate declined from the August rateto 4.2 percent with a sharp decline in food services and drinking places, as well as below-trend growth in most other industries . Manufacturingemployment decreased by 1,000 jobs, the sector's second decline in the last three months. That brings the average monthly change for the sector to 9,800 additional jobs over the last 12 months. In total, manufacturing employment has increased by roughly 171,600 jobs over the last year.

Last 12-mo.

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The Aluminum Association

7Global Trends

October 2 – The headline Markit Mexico Manufacturing PMI registered 52.8 in September, up from 52.2 in August, pointed to the strongest improvement in the health of the sector in nearly one-and-a-half years. Manufacturing conditions in Mexico continued to improve at the end of Q3, as a marked and accelerated expansion in factory orders underpinned a robust upturn in output. Jobs were created over the month, while firms also purchased greater quantities of inputs. Meanwhile, low stock levels at suppliers, combined with higher prices paid for imported materials, caused a sharper increase in input costs. In turn, goods producers raised their own selling prices again.

October 2 –The Markit Canada Manufacturing Purchasing Managers’ Index (PMI) registered 55.0 in September, up from 54.6 in August. September data revealed a positive month overall for the Canadian manufacturing sector, with output and new business growth regaining momentum after August’s slowdown. Canadian manufacturers indicated a solid degree of job creation in September, although the rate of employment growth eased from August’s survey-record high. Manufacturers are also more confident about the year ahead business outlook than at any time since April. Meanwhile, input cost inflation reached its highest level for four months in September.

October 6, 2017

October 2 – The Markit final U.S. Manufacturing Purchasing Managers’ Index (PMI) registered 53.1 in September, rising from 52.8 in August. September survey data signaled a further improvement in operating conditions across the US manufacturing sector. The overall upturn was supported by further growth in output and new orders. Strong client demand was a key factor behind the fastest rise in staffing levels so far this year. Business confidence also remained strong, despite slipping since August. On the price front, cost pressures intensified, with input prices increasing at the quickest pace since December 2012. Output charges meanwhile rose at the steepest rate for five months.

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The Aluminum Association

8Global Trends Continued...

October 2 – The final Markit Eurozone Manufacturing PMI rose to a 79-month high of 58.1, signaling expansion for the fifty-first month in a row. The average reading over Q3 (57.4) was the highest since Q1 of 2011. Eurozone manufacturing production expanded at the fastest pace in almost six-and-a-half years in September, underpinned by a strong and accelerated increase in new work received. Improving domestic market conditions combined with increased levels of new export business were the main factors supporting the latest increase in new work. Although the rate of expansion in new export orders was moderate, it remained among the strongest seen over the past six-and-a-half years.

October 2 – The headline Nikkei Japan Manufacturing PMI was at a four-month high of 52.9 in September, rising from 52.2 in August and signaling a robust improvement in the health of the manufacturing sector. Stronger upturns in output and new orders supported the improved headline figure. There was evidence of strong demand from abroad, with new export orders rising to the greatest extent seen in seven months. Anecdotal evidence pointed to business from the U.S. and Asian countries. Solid improvements in buying activity appeared to increase pressures on supply chains, as vendor delivery times worsened at the strongest rate since May 2011.

October 6, 2017

September 30 – The Caixin China General Manufacturing PMI fell from 51.6 in August to 51.0 in September, but remained above the crucial no-change 50.0 mark for the fourth month in a row. Manufacturing operating conditions in China continued to improve at the end of the third quarter, albeit only marginally. Production and new orders both expanded at softer rates, with firms also signaling slower growth in export sales. As a result, purchasing activity increased at a weaker pace while staffing levels continued on a downward trend. Environmental inspection policies meanwhile weighed on supplier performance, with delivery times lengthening to the greatest extent since January.

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The Aluminum Association

9Energy

October 6 – Federal offices were closed on October 9, 2017 in observance of Columbus Day. Our weekly update of the Nominal Broad Dollar Indexwill resume next week.

Last week, the Index closed at 119.50, increasing 1.2 percent over the Friday, September 22 close of 118.07. Over the last six months, the index is down 3.8 percent, while it's off 1.8 percent over the last 12 months.

The nominal broad 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.

October 6 – On the NYMEX, the near-month WTI crude oil futures (Cushing, OK WTI Future Contract 1) closed the week at $49.29/bbl on Friday, October 6, down $2.38 (-4.6%) from last week's close of $51.67/bbl. Weekly oil prices declined for the first time in over a month as traders tracked Tropical Storm Nate’s path into the Gulf of Mexico and its potential impact on the region’s energy infrastructure. Active U.S. oil-drilling rigs declined by 2 to 748. Compared to last year, oil rigs have increased by 320. Brent Crude on London's ICE Futures exchange also closed the week down at $55.62/bbl (-2.1%). Friday's spread between the two was $6.33/bbl, up from last week's spread of $5.12/bbl.

October 5 – The U.S. Energy Information Administration reported that natural gas spot prices were mixed this report week (Wednesday, September 27 to Wednesday, October 4). The Henry Hub spot price fell from $2.95 per million British thermal units (MMBtu) last Wednesday to $2.81/MMBtu.

At the New York Mercantile Exchange (Nymex), the October 2017 contract price expired last Wednesday at $2.974/MMBtu. The November 2017 contract price decreased to $2.940/MMBtu, down 12¢ Wednesday to Wednesday.

U.S. Dollar

October 6, 2017

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The Aluminum Association

10The 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)Electrical Conductor Shipments (Monthly)Extruded Products Shipments and Press Utilization (Monthly)Flat Roll Capacity (Annual)Foil Shipments (Monthly)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 U.S., Canada and Mexico Imports and Exports (by Commodity), MonthlyForeign 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.

October 6, 2017