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Due to a recent downturn in prices, nearly half of China’s aluminum capacity is probably operating at a loss, Alcoa’s CEO stated in an earnings call last week. The company, therefore, estimates that between 10 to 20% of global aluminum smelter capacity was unprofitable in June. Falling aluminum prices might have been tolerable; however, the company expects that rising energy and raw material costs will erode its profit margins, despite increasing global demand. Surging electricity costs in North America and Europe, recession fears, and COVID lockdowns in China are affecting global aluminum demand and supply, according to Bloomberg. |
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Analysts recently interviewed by Bloomberg feel that the recent smelter closures could be supportive of aluminum prices. Aluminum end-users might consider applying simple hedges that provide upside price protection, such as buying swaps or call options, both of which would establish a maximum price. Such positions are basic for end-user hedging; however, they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (7/25/2022) |
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Note: Clients with AEGIS Platform access can see this and other research, plus hedge portfolio reporting and tools here. |
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Today's Charts |
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AEGIS Insights |
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07/20/2022: AEGIS Factor Matrices: Most important variables affecting metals prices 07/20/2022: Interest in Hedging Cobalt is Increasing 07/07/2022: Have Copper Prices Begun to Find a Bottom? |
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| Important Headlines | ||
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7/21/2022: China steel trade to fall in coming months as weak demand outlook weighs 7/19/2022: China’s homebuyers are running out of patience with the real estate slump 7/19/2022: Two giant miners warn of tougher times as world demand wavers 7/18/2022: China scrambles to defuse alarm over mortgage boycotts and banks runs 7/18/2022: China raises loan-support efforts for developers amid mortgage boycott 7/18/2022: Estimated NorthAm auto losses rise 7/18/2022: Commodity Tracker: 5 charts to watch this week 7/17/2022: Mongolia says Russia-China gas pipeline will break ground in 2024 7/17/2022: CMOC's Congo mine suspends copper and cobalt exports |
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Important Disclosure: Indicative prices are provided for information purposes only, and do not represent a commitment from AEGIS Hedging Solutions LLC ("Aegis") to assist any client to transact at those prices, or at any price, in the future. Aegis makes no guarantee to the accuracy or completeness of such information. Aegis and/or its trading principals do not offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program. Certain information in this presentation may constitute forward-looking statements, which can be identified by the use of forward-looking terminology such as “edge,” “advantage,” “opportunity,” “believe” or other variations thereon or comparable terminology. Such statements are not guarantees of future performance or activities.
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