Rise in LME price expected to boost Aluminum shipments in North America

A continued run-up in the London Metal Exchange aluminum price and the Federal Reserve’s recent decision to extend quantitative easing could boost aluminum shipments from North American distributors in the coming months, market sources said.

"I’m optimistic for the next few months. The metal (price) situation will play into customers’ purchasing plans. What the Fed did will loosen some money. October should be an active month," one distributor source said.

"We may see some mixed numbers for the month of September, but I do see the overall trend going up," a second service center source echoed, even as he said fewer billing days could crimp overall shipment numbers for September.

The second distributor agreed that the higher aluminum prices might spur buying as consumers look to secure material ahead of any further rise; however, the purchasing boost will not be immediate, he said.

"I think there’s going to be initial hesitation, but if the numbers stick, then people will start building positions," he said.

Three-month aluminum traded at $2,140.50 per tonne in officials on the LME on Wednesday, down from $2,154 per tonne the day prior but well above the sub-$1,900-per-tonne levels recorded at the start of the month.

The optimistic outlook for the months ahead comes as U.S. distributor shipments of aluminum products jumped significantly in August, climbing 10.2 percent to 134,100 tons compared with 121,700 tons in July, although they were still 1.3 percent lower than the 135,900 tons recorded during the same month a year ago, according to data from the Metals Service Center Institute (MSCI).

Service center sources had said previously that shipments would likely start improving in August from the low levels seen earlier in the summer.

As a result of the increased activity, aluminum inventories fell to 2.8 months of supply last month, 12.5 percent lower than the 3.2 months of supply recorded at the end of July but still above the 2.7 months held in August last year.

Total U.S. aluminum shipments during the first eight months of the year are up 3.1 percent to 1.05 million tons compared with 1.02 million tons shipped during the same period last year, MSCI data show.

Canadian service centers also saw a rise in activity last month, shipping 13,400 tons of aluminum products in August, up 7.2 percent from the 12,500 tons shipped in July and up 5.4 percent from shipments during the same period a year ago.

Inventory levels fell accordingly, with distributors north of the border holding 2.9 months worth of supply at the end of August, down from 3.1 months worth at the end of July, according to MSCI data.