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Aluminum Highlights Week Ending: April 22, 2016

An update on Industry activity and economic indicators

Aluminum prices rallied significantly this week, with the LME cash up $100/mt to settle at $1635. Prices are back to their highest levels since July. The current rally is similar to the one a couple of months ago when the cash price rose around $120 in three weeks to eclipse $1600 in early March. The difference between now and then is that the market remains in contango, albeit a narrow one, with the 3-month price $7 above the cash price. The rally in March saw the market move into backwardation. And it didn’t take long for the cash price to pull back as it typically does when the market reverts to its more normal state of contango. Aluminum prices may have been lifted by a rise in the broader commodity complex. The CRB spot index, which combines 22 commodities, was up around 1% for the week. The move in oil was more pronounced, rising 8% to nearly $44 per barrel. Perhaps prices rose as LME inventories continued to drop steadily. Stocks are now at 2.68 mmt, down 37 kmt this week and 220 kmt year-to-date. Whatever the reason, the increase in aluminum prices was not due to the latest trade data out of China. The country’s aluminum exports surged 50% from February to March to reach 420 kmt. The MWP has held firm at 8¢/lb for the past three weeks. Premiums in Japan and Europe have been mostly steady as well. The only change was in Europe where the premium slipped $5 last Friday.

Market View By: Timothy P. Hayes, CFA – Lawrence Capital Management

The views expressed in the “Market View” are those of the author and do not necessarily represent the views of the Aluminum Association

This report is based on information reported to the Association by participants, which is aggregated by the Association. While the Association believes that its statistical procedures and methods are reliable, it does not warrant the accuracy or completeness of the data. All data contained herein are subject to revision. For further information, contact Ryan Olsen, V.P. Business Information and Statistics at 1-703-358-2984 or email rolsen@aluminum.org. © The Aluminum Association, Inc. All rights reserved.

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2 Industry Activity

April 15 – Shipments of Aluminum Powder and Paste to domestic markets by domestic producers, including imports by domestic producers, totaled 7.16 million pounds during March 2016, off 11.8 percent from the March 2015 total of 8.11 million pounds. Compared to the previous month, shipments increased 24.6 percent over the February 2016 total of 5.74 million pounds. Year-to-date shipments through March 2016 totaled 18.50 million pounds, down 26.5 percent from the year-to-date 2015 total of 25.16 million pounds. Compared to March 2015, shipments of powder to domestic markets decreased 15.6 percent to 6.05 million pounds, while shipments of paste rose 17.6 percent to 1.10 million pounds.

April 11 – The Aluminum Association of Canada reported that primary aluminum production in Canada continued its upward trend by increasing for the tenth consecutive month. Production in March 2016 increased 1.6 percent to an annual rate of 3,202,689 metric tonnes, up 49,145 tonnes over the February 2016 rate of 3,153,544 TPY. Compared to a year ago, production was up 13.9 percent over the March 2015 rate of 2,811,418 TPY. Actual production in March totaled 271,266 metric tonnes. Through the first three months of 2016, production is up 12.1 percent over the same period in 2015. Note: North American primary aluminum production data for March 2016 are not available at this time.

April 22, 2016

April 13 – Estimated shipments of Aluminum Foil by U.S. and Canadian producers totaled 87.6 million pounds during March 2016, a rise of 1.7 percent over the March 2015 total of 86.1 million pounds. Compared to the previous month, shipments increased 10.4 percent over the February 2016 total of 79.3 million pounds. Year-to-date shipments through March 2016 totaled 240.6 million pounds, up 3.9 percent over the 2015 year-to-date total of 231.5 million pounds.

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3 Industry Activity Cont…

April 20 – Estimated net shipments of Aluminum Sheet and Plate by U.S. and Canadian producers totaled 735.2 million pounds during March 2016, a rise of 1.8 percent over the March 2015 total of 722.2 million pounds. Compared to the previous month, shipments increased 7.8 percent over the February 2016 total of 682.0 million pounds. Year-to-date shipments through March 2016 totaled 2,080.0 million pounds, up 1.3 percent over the year-to-date 2015 total of 2,052.7 million pounds. Shipments of Can Stock totaled 366.5 million pounds during March 2016, up 1.7 percent over the March 2015 total of 360.5 million pounds, while shipments of Non-heat Treatable Sheet (excluding Can Stock) were down six-tenths of one percent to 244.6 million pounds and shipments of All Other Sheet and Plate increased 7.4 percent to 124.1 million pounds.

April 15 – New can stock (class) scrap receipts totaled 61.6 million pounds during March 2016, a rise of 9.6 percent over the March 2015 total of 56.2 million pounds. Compared to the previous month, class scrap receipts increased 11.9 percent over the February 2016 total of 55.0 million pounds. Year-to-date class scrap receipts through March 2016 totaled 172.3 million pounds, up 3.4 percent over the 2015 year-to-date total of 166.6 million pounds.

April 22, 2016

April 19 – Shipments of can stock by domestic producers totaled 366.5 million pounds during March 2016, a rise of 1.7 percent over the March 2015 total of 360.5 million pounds. Compared to the previous month, shipments increased 8.0 percent over the February 2016 total of 339.3 million pounds. Year-to-date shipments through March 2016 totaled 1,039.1 million pounds, up eight-tenths of one percent over the 2015 year-to-date total of 1,031.0 million pounds. Compared to March 2015, producer shipments of can stock to U.S. markets increased 3.0 percent to 320.2 million pounds, while exports were off 6.9 percent to 46.3 million pounds.

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4 Industry Activity Cont…

April 13 – The Producer Price Index for final demand (which includes goods and services) decreased one-tenth of one percent in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported. Final demand prices decreased two-tenths of one-percent in February and increased one-tenth of one percent in January. The index for final demand goods increased two-tenths of one percent and final demand goods less foods and energy increased one-tenth of one percent. On an unadjusted basis, the final demand index moved down one-tenth of one percent for the 12 months ended in March.

April 20 – Estimated shipments of Aluminum Forgings and Impacts by U.S. and Canadian producers totaled 27.8 million pounds during March 2016, a decrease 8.4 percent from the March 2015 total of 30.4 million pounds. Compared to the previous month, shipments rose 8.4 percent over the February 2016 total of 25.7 million pounds. Year-to-date shipments through March 2016 totaled 79.8 million pounds, off 2.6 percent from the 2015 year-to-date total of 82.0 million pounds.

April 22, 2016

April 22 – Shipments of Aluminum Extruded Products (extruded shapes, pipe & tube, and rod & bar) by U.S. and Canadian producers totaled an estimated 466.1 million pounds during March 2016, a rise of 2.4 percent over the March 2015 total of 455.2 million pounds. Compared to the previous month, shipments increased 7.6 percent over the February 2016 revised total of 433.3 million pounds. Year-to-date shipments through March 2016 totaled 1,318.2 million pounds, up 2.9 percent over the year-to-date 2015 total of 1,281.0 million pounds.

Economic Activity

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5 Economic Activity Cont…

April 15 – The Federal Reserve Board announced that U.S. industrial production decreased six-tenths of one percent in March after also decreasing six-tenths of one percent in February (r). Manufacturing output was down two-tenths of one percent, following a decline of one-tenth of one percent the previous month. Compared to last year, manufacturing output in March was up five-tenths of one percent, while the production of durable goods and nondurable goods were up 0.3 percent and 0.7 percent, respectively. At 103.4 percent of its 2012 average, total industrial production in March was 2.0 percent below its year-earlier level. Capacity utilization for the industrial sector decreased 0.5 percentage point in March to 74.8 percent, a rate that is 5.2 percentage points below its long-run (1972–2015) average.

April 14 – The U.S. Consumer Price Index for All Urban Consumers (CPI-U) increased one-tenth of one percent in March on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported. This followed last month's reading in which the index declined two-tenths of one percent. The core consumer prices (index for all items less food and energy) also rose one-tenth of one percent, after increasing three-tenths of one percent the prior month. The unadjusted all items index was up nine-tenths of one percent over the last 12 months, while the core price index has increased 2.2 percent over the same period.

April 22, 2016

April 14 – Preliminary data published by Ward's Automotive show that North American (Canada, Mexico, and the United States) light vehicle production totaled 1.57 million units during March 2016, down six-tenths of one percent year over year. U.S. production decreased five-tenths of one percent y/y, while Mexican and Canadian production decreased 10.8 percent and increased 15.2 percent, respectively. Production of medium and heavy trucks totaled 40,534 units in March, down 18.7 percent from a year ago. Through the first three months of 2016, light vehicle production in North America was up 4.7 percent over last year, with the U.S. up 5.2 percent. At the same time, Mexican and Canadian production was down 4.9 percent and up 17.3 percent, respectively. Year-to-date medium and heavy truck production was down 9.2 percent from last year.

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6 Economic Activity Cont…

April 22 – On the NYMEX, near-month WTI crude oil futures (Cushing, OK WTI Future Contract 1) closed the week at $43.73/bbl on Friday, April 22, up $3.37 (+8.3%) from last week's close of $40.36/bbl. Crude oil futures closed higher for the third consecutive week aided by recent declines in U.S. crude production and domestic oil-rig counts. The number of active U.S. oil-drilling rigs decreased by 8 to 343. Compared to last year, oil rigs have fallen by 360. Brent Crude on London's ICE Futures exchange closed the week up to $45.11/bbl (+4.7%). Friday's spread between the two was at $1.38/bbl, compared to last week's close of $2.74/bbl.

April 19 – The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced that privately-owned housing starts in March 2016 were at a seasonally adjusted annual rate of 1,089,000 units, down 8.8 percent from the revised February 2016 rate of 1,194,000. Compared to a year ago, housing starts were up 14.2 percent over the March 2015 rate of 954,000. Single-family housing starts in March were at a rate of 764,000, down 9.2 percent from the revised February figure of 841,000. The March rate for buildings with five or more units was 312,000, down 8.5 percent from the revised February estimate of 341,000. Through the first three months of 2016, privately-owned housing starts were up 14.5 percent over the same period in 2015.

April 21 – The U.S. Energy Information Administration reported that natural gas prices increased at most locations this report week (Wednesday, April 13, to Wednesday, April 20). The Henry Hub spot price rose during the week, from $1.98 per million British thermal units (MMBtu) last Wednesday to $2.02/MMBtu. At the New York Mercantile Exchange (Nymex), the price of the near-month futures contract also rose slightly over the report week, from $2.036/MMBtu last Wednesday to $2.069/MMBtu.

Energy

April 22, 2016

The Aluminum Association

7 U.S. Dollar

April 22 – According to this week's release by the Federal Reserve Board, the Nominal Broad Dollar Index closed the week at 119.79 on Friday, April 22, up one-tenth of one percent from the Friday, April 15 close of 119.67. This followed last week's reading in which the index decreased two-tenths of one percent. Despite the slight increase, the index hasn't surpassed its 30-Day Moving Average for over 12 weeks. Over the last six months the index is up three-tenths of one percent, while it is up 3.9 percent over the last year. The nominal broad dollar index is a weighted average of the foreign exchange values of the U.S. dollar against the currencies of a broad group of major U.S. trading partners.

April 22, 2016

The Aluminum Association

8 The Aluminum Association, founded in 1933, works globally to aggressively promote aluminum as the most sustainable and recyclable automotive, packaging and construction material in today’s market. The Association represents North America and foreign-based primary producers of aluminum, aluminum recyclers, producers of semi-fabricated products and foundries as well as suppliers to the industry or distributors or jobbers. The Aluminum Association's statistical programs provide industry information on primary aluminum production, new orders of mill products, industry shipments, end use market estimates, inventories, recycling and foreign trade on a monthly, quarterly and annual basis. Special surveys provide data on specific subjects such as primary capacity, flat roll capacity, inventories and castings shipments. Custom reports are available on a for-fee basis. Web briefings are also available upon request. Industry Overview Aluminum Statistical Review (Annual Fact Book) Aluminum Highlights (Weekly) Aluminum Situation (Monthly) Summary of Producer Shipments and Inventories (Monthly) Primary Aluminum Primary Aluminum Production – U.S. and Canada (Monthly) Primary Installed Capacity (Annual) Shipments of Primary Aluminum by Form (Quarterly) Mill Products Index of Net New Order Receipts for Aluminum Mill Products (Monthly) Can Stock Shipments (Monthly) Electrical Conductor Shipments (Monthly) Extruded Products Shipments and Press Utilization (Monthly) Flat Roll Capacity (Annual) Foil Shipments (Monthly) Forging and Impacts Shipments (Monthly) Rod, Bar, and Wire Shipments (Monthly) Sheet and Plate Shipments (Monthly) End Use Extrusion Shipments by End Use (Quarterly) Fin Stock Shipments by End Use (Quarterly) Foil Shipments by End Use (Monthly) Sheet and Plate Shipments by End Use (Quarterly) Castings U.S. Foundry Castings Shipments (Quarterly) Canada Foundry Castings Shipments (Annual) Recycling New Can Stock (Class) Scrap Receipts (Monthly) Used Beverage Can Reclamation (Annual) Foreign Trade (based on government customs data) Summary of U.S., Canada and Mexico Imports and Exports (by Commodity), Monthly Foreign Trade Online Database - U.S., Canada and Mexico Exports & Imports of Aluminum (By Commodity, by Country) For a complete list of statistical publications and reports visit our bookstore.

April 22, 2016