Aluminum Fell in May, Held On to Last Year’s Lows

Aluminum prices

As we saw in the previous part of the series, earnings of aluminum producers such as Alcoa (AA), Century Aluminum (CENX),  and Rio Tinto (RIO) have varying sensitivities to aluminum prices. So it’s crucial for investors in these companies to follow aluminum prices. In this part of the series, we’ll look at the trend in aluminum prices.

Aluminum prices fell ~7% in May. However, aluminum is still trading with year-to-date gains of more than 3%. Also, aluminum is comfortably above its 2016 closing lows of $1,450 per metric ton. Notably, while copper breached its 2015 lows in January, aluminum managed to hold on to last year’s lows.

Other metals

The May mayhem has negatively affected other industrial metals (DBC) as well. Copper and zinc fell 7% and 1%, respectively, in May. Benchmark iron ore prices have also fallen almost 20% after a steep rally earlier this year. However, thanks to trade duties, steel prices in the United States (DIA) actually increased in May. Despite all the slowdown talks, steel has been among the best performing industrial metals this year, as you can see in the above graph. Although analysts’ opinions are divided over the sustainability of higher price levels, steel has managed to steal the show so far in 2016.

Negative for aluminum producers

Lower aluminum prices would hurt the earnings of Alcoa and other aluminum producers. Investors should also keep an eye on alumina prices. We’ll look at the recent trend in alumina later in this series. But next, let’s explore how physical aluminum premiums are playing out.