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By Metal Miner – Feb 21, 2024, 12:00 PM CST
- Closure of the New Madrid smelter in the U.S. interferes with aluminum market characteristics, resulting in additional rate decreases.
- Aspects such as high energy costs and robust output from China add to the smelter closure and subsequent market effect.
- Alcoa reports a decrease in international aluminum deliveries in the middle of well balanced to somewhat surplus market conditions, indicating soft need.
Following a 4.7% month-over-month decrease throughout January, aluminum costs fell an extra 1.9% throughout the very first half of February. Regardless of these decreases, aluminum costs continued to sell their long-lasting sideways variety. The Midwest Premium likewise stays combined, with costs backtracking to the disadvantage following a temporary bounce at the end of January.
In general, the Aluminum Monthly Metals Index (MMI) moved sideways, with a modest 1.8% decrease from January to February.
Aluminum Prices, Premium Market Shakes Off Smelter Closure
Headings were abuzz with news that the U.S. would lose almost a 3rd of its main aluminum smelting capability with the closure of New Madrid in Missouri. The smelter was the 2nd biggest in the U.S., representing around 30% of domestic main aluminum production and boasting a yearly capability of 263,000 heaps. While the curtailment of New Madrid saw the Midwest Premium dive over 6% throughout the last week of January, the premium backtracked nearly right away.
Energy Prices, Chinese Output Caused New Madrid Closure
While New Madrid had actually long reported battles with success, its owner, Magnitude 7 metals, associated the smelter's closure to the combined impacts of high energy rates and robust output from China.
Tariffs continue to obstruct Chinese aluminum from markets like the U.S., the product still affects the international supply balance. This, in turn, substantially effects costs. According to information from the International Aluminum Institute, Chinese production increased over 3% from 2022 to 2023, consistently setting brand-new regular monthly record highs throughout the year.
While markets appeared worried that the start of the dry season in China's hydro-rich Yunnan Province would suppress the nation's output and deal assistance to rates, that has yet to happen. The last 2 months of 2023 saw Chinese production levels trend up from the very same months of 2022, albeit down a little from their all-time high in October 2023.
Energy costs sit listed below their previous highs, New Madrid's closure recommends they stay too high to balance out present need levels. The Midwest Premium, a proxy for U.S. need, appeared mainly flat throughout Q4, it continued to edge lower. By the 2nd half of February,
