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Nonferrous Market Developments

For the year-to-date (through August 9th), nickel prices have outperformed the other major base metals at the London Metal Exchange, rising nearly 15 percent as compared to the end of 2017:
YTD2018PercentageCHGinLME_500

Fastmarkets reports that “Falling visible {nickel} stocks continue to reinforce bullish fundamental expectations, which will support higher prices going forward. Prices are attempting to reclaim the $14,000-per-tonne level, which support this hypothesis. Although in view of the current macroeconomic uncertainties, downside risks will remain in the short term.”

While aluminum prices have stabilized recently, they were still down 5% at the LME as of early August. Given the current aluminum sector trade disputes, one might expect that aluminum production in the U.S. would rise steeply to take up the slack from diminished import volumes. Apparently that has not been the case. The Aluminum Association reports U.S. aluminum production declined nearly 12% month-on-month in June: “The Aluminum Association, in cooperation with the Aluminum Association of Canada, reported primary aluminum production in North America (U.S. and Canada) was at an annual rate of 3,683,641 tonnes during June 2018, declining 90,024 tpy (-2.4%) from the May 2018 rate of 3,773,664 tonnes. The production rate in the U.S. fell 11.9 percent m/m, while the Canadian rate increased four-tenths of one percent. Compared to a year ago, the North American annual rate was 6.2 percent  below the June 2017 rate of 3,928,033 tonnes. Actual production in June 2018 totaled 302,765 tonnes.”
NorthAmericaPrimaryAluminum_500
Alcoa lowered its 2018 earnings projection due to aluminum tariffs imposing a “significant” headwind. Although sales have been stronger than expected, the tariff costs may push manufacturers to move operations elsewhere to access metal that’s not subject to extra duties. This may be reactionary as it remains to be seen whether transportation logistics will be robust enough to handle the shift in trade patterns. 
 
A reduction in the aluminum supply from China is expected and may be exacerbated as electric vehicles capture an increasing share of the new car market. Although aluminum is in much higher supply than many of the other metals involved with battery development for electric vehicles, it is a base metal that doesn’t appear to be substitutable in many battery chemistries. Here’s the trend in LME official 3-mo. aluminum prices so far this year:
LMEOfficialAluminum_500

Nonferrous Beat

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