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Demand Contraction, Booming Production, Growing Inventories

KEY MESSAGES:

  • Global primary demand contracted in Q1 2019 mainly on the back of contractions in Europe and Asia, and as China is growing at the weakest pace in a decade.
     

  • In fact, North America’s mill shipments have started to contract as well, as auto production declines and construction loses momentum.
     

  • Oversupply of scrap in North America continues to spill-over to other regions. Cannibalization of primary demand continues, as predicted by HARBOR, and is expected to accentuate ahead.
     

  • Chinese aluminum semis exports boomed in Q1 and displaced demand in ROW. Although Chinese exports will continue to grow, we see some moderation as the price arbitrage window has narrowed.
     

  • World production of primary aluminum has stabilized and is set to boom in the next months on production increases in the Middle East, India, Russia and China.
     

  • ROW’s market already registered in Q1 its smallest primary aluminum deficit in three years and is set to shift to a growing surplus during 2019-2020.
     

  • Conditions remain bearish for prices. As predicted correctly by HARBOR a year ago, LME prices have fallen to a 27-month low of $1,770 per mton.

More details in full report.