Aluminum price hits four-year low

Fund manager calls aluminum’s fundamentals “worst” among metals.

April 10, 2020

The value of one type of aluminum on the London Metal Exchange (LME) hit a four-year low April 9 as demand for the metal suffers in the wake of COVID-19 related restrictions.

The price on one alloy hit $1,455 per metric ton (66 cents per pound), the lowest value it has seen since January 2016. Another aluminum contract, trading at $1,465 per metric (66.4 cents per pound) has suffered a 20 percent drop since mid-January.

An online article by the Australian Associated Press (AAP) quotes analysts and fund traders as citing drastically reduced activity in the automotive industry as having caused aluminum’s supply to vastly outweigh demand.

One fund trader quoted by the AAP remarks, “Aluminum has some of the worst fundamentals in the base [metals] complex; the longer the lockdowns, the worse it looks.”

Not all was gloomy on the LME as it prepared to close for the Easter holiday weekend. Copper, which has been suffering a similar downward price plunge, rose by 3.5 percent in value during the same week, according to Reuters.

Analysts quoted by Reuters cite a rally in equities markets and a reduction or flattening of new COVID-19 cases in much of the world as reasons for the rebound.

The same logic may well apply to a bounce-back in aluminum prices. Vehicle and engine production will invariably return, perhaps as early as May in North America. Packaging markets largely have held up during lockdowns, as grocery store purchases represent the bulk of remaining consumer spending.

Investors and analysts quoted by the AAP, however, say the world will first have to work through considerable finished aluminum inventories before something closer to a supply-demand balance can be achieved.