What’s the price of aluminum right now? That’s the million-dollar question that isn’t always easy to answer.

What is the Price of Aluminum?

Aluminum prices are near their lowest levels of the year. At $1.10/lb., the price of LME aluminum has moved lower due to such factors as a stronger US dollar, rate hikes, and lockdowns in China. Are we beginning to hit a trough?

For this, we look at a set of data from Wood McKenzie Ltd. It is a cost curve showing current aluminum production levels (x axis) which is roughly 70,000 metric tons, and the cost for global producers to produce aluminum (y axis). The blue dot represents the point at which aluminum prices on the LME currently exist.

According to this data, it is estimated that roughly 23% of aluminum smelters could be in danger of producing at levels deemed unprofitable.

 

Nick Webb, Ryerson's director of risk management, commodities hedging, digs in deeper in the video below:

What Makes Up the Price of Aluminum?

Unlike with other commodities like oil, determining the price of aluminum encompasses more than simply the cost of the raw material.

First, it’s important to understand the three factors that influence the price of aluminum.

  1. The Commodity. This is cost of the raw material and traded on the London Metal Exchange.
  2. The Premium. For the U.S., this is S&P Global Platts Midwest Premium. It is a regional differential to the global price of aluminum. It is impacted by the regional cost of logistics,and supply and demand conditions in the U.S.
  3. The Conversion. This is the price that mills charge to convert the commodity to usable product. The price is driven by capacity availability and competition.

And that is where the story of how market factors have influenced the pricing of aluminum begins. Check out the video below: