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Aluminum Highlights

Week Ending: January 20, 2017An update on Industry activity and economic indicators

Market ViewBy: Beau Walker, Department Leader for Market Intelligence – Trane Building Advantage

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

The NYMEX prompt-month natural gas contract continued to show volatility throughout the end of 2016 and beginning of 2017, trading to a low of $2.546 per MMBtu in November as a new storage inventory record was set. Early cold across much of the country in late November and early December pushed the January (prompt trading month at the time) gas contract to $3.995 per MMBtu in December, ultimately settling at $3.93 per MMBtu on the same day, both of which are the highest daily trades or monthly settles since late 2014. February became the prompt trading month on December 29, and the contract quickly moved lower, bottoming out at $3.10 per MMBtu on January 9. Since then the contract has traded range-bound between $3.10 per MMBtu and $3.46 per MMBtu. Below to much-below average temperatures for the first half of January also impacted natural gas storage inventories. A total of 684 Bcf of gas was drawn from inventories in the month of December, lowering inventories to 3,311 Bcf entering 2017. In December 2015, only 296 Bcfof was drawn from storage while the 5-year average December pull is 429 Bcf. Despite the hefty withdrawals, total storage inventories are still expected to enter the spring injection season above the 10-year average levels. LNG liquefaction continues to grow in early 2017. Currently the United States is liquefying approximately 2.0 Bcf per day of natural gas at the Sabine Pass facility in Louisiana, where testing of their third liquefaction train is currently underway. Bythe Q3 of 2017, total liquefaction capacity is expected to reach 2.8 Bcf per day. Due to increases in the forward cost of natural gas, power generation demand for natural gas has decreased compared to January 2016. With NYMEX forward contracts trading more than $1.00 per MMBtu higher than they were in early 2016, coal-to-gas generation switching has not been as prominent, limiting power generation demand.

Prompt-month West Texas Intermediate (WTI) rallied sharply in late 2016 as traders weighed the impact of the OPEC/non-OPEC production cuts. Prompt-month WTI topped out at $55.24 per barrel on January 3, the highest prompt-month trade since July 2015, before pulling back and settling into a trading range between $50.50 per barrel and $54.00 per barrel. Domestic crude oil production was estimated at 8.944 million barrels per day (MMbpd) as of January 13, an increase of 0.247 MMbpd since the beginning of December but 0.283 MMbpd behind year-ago levels. Domestic crude inventories remain strong as well, sitting at 485.4 million barrels as of January 13. This represents an increase of 2.84 million barrels over year-ago levels and is a record high for this time of year. Globally, Brent crude traded to a high of $58.36 per barrel but has since fallen to under $55.40 per barrel as traders continue to weigh the impact of production cuts on global supply and monitor if OPEC member nations and non-OPEC nations continue to adhere to the agreed upon production cuts.

The Aluminum Association

2Industry Activity

January 18 – Shipments of Aluminum Powder and Paste to domestic markets by domestic producers, including imports by domestic producers, totaled 5.86 million pounds during December 2016, an increase of 6.4 percent over the December 2015 total of 5.51 million pounds. Compared to the previous month, shipments decreased 9.6 percent from the November 2016 total of 6.48 million pounds. Preliminary shipments for 2016 totaled 75.15 million pounds, off 18.2 percent from the 2015 total of 91.84 million pounds.

Compared to December 2015, shipments of powder to domestic markets increased 7.2 percent to 5.11 million pounds, while shipments of paste rose 1.5 percent to 0.75 million pounds.

January 20, 2017

January 18 – New can stock (class) scrap receiptstotaled 53.6 million pounds during December 2016, off seven-tenths of one percent from the December 2015 total of 54.0 million pounds. Compared to the previous month, receipts rose six-tenths of one percent over the November 2016 total of 53.3 million pounds. Preliminary class scrap receipts for 2016 totaled 685.1 million pounds, up six-tenths of one percent over the 2015 total of 681.2 million pounds.

January 19 – Shipments of Aluminum Extruded Products (extruded shapes, pipe & tube, and rod & bar) by U.S. and Canadian producers totaled an estimated 338.9 million pounds during December 2016, off 4.3 percent from the December 2015 total of 354.0 million pounds. Compared to the previous month, shipments decreased 17.2 percent from the November 2016 total of 409.5 million pounds. Preliminary shipments for 2016 totaled 5,160.6 million pounds, up nine-tenths of one percent over the 2015 total of 5,112.8 million pounds.

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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3Industry Activity Cont…

January 20 – Preliminary estimates indicate that aluminum demand in the United States and Canada (shipments by domestic producers plus imports) totaled an estimated 24,296 million pounds through November of 2016, up 2.1 percent over the same period last year. Demand for semi-fabricated (mill) products totaled 17,031 million pounds, up four-tenths of one percent. Apparent consumption (demand less exports) in domestic markets totaled an estimated 21,406 million pounds, up 1.1 percent year-to-date.

January 20, 2017

January 20 – Estimated shipments of Aluminum Drawing Stock, Bare Wire and Rod & Bar by U.S. and Canadian producers totaled 86.0 million pounds during December 2016, down nine-tenths of one percent from the December 2015 total of 86.8 million pounds. Compared to the previous month, shipments decreased 12.5 percent from the November 2016 total of 98.2 million pounds. Preliminary shipments for 2016 totaled 1,181.1 million pounds, off six-tenths of one percent from the 2015 total of 1,188.5 million pounds.

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4Economic Activity

January 18 – The Federal Reserve Board announced that U.S. industrial productionincreased eight-tenths of one percent in December after decreasing seven-tenths of one percent in November (r). Manufacturing output increased two-tenths of one percent m/m. Compared to last year, manufacturing output in December increased four-tenths of one percent, while the production of durable goods increased five-tenths of one percent m/m and nondurable goods declined three-tenths of one percent. At 104.6 percent of its 2012 average, total industrial production in December was 0.5 percent above its year-earlier level. Capacity utilization for the industrial sector increased 0.6 percentage point in December to 75.5 percent, a rate that is 4.5 percentage points below its long-run (1972–2015) average.

January 20, 2017

January 13 – The Producer Price Index for final demand (which includes goods and services) increased three-tenths of one percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported. Final demand prices increased four-tenths of one percent in November and were unchanged in October. The index for final demand goods increased seven-tenths of one percent and final demand goods less foods and energy increased three-tenths of one percent m/m. On an unadjusted basis, the final demand index increased 1.6 percent for the 12 months ended in December.

January 18 – The U.S. Consumer Price Index for All Urban Consumers (CPI-U) increased three-tenths of one percent in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported. This followed last month's reading in which the index increased two-tenths of one percent m/m. The core consumer prices (index for all items less food and energy) increased two-tenths of one percent, after a similar increase the prior month. The unadjusted all items index rose 2.1 percent over the last 12 months, while the core price index has increased 2.2 percent over the same period.

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5Economic Activity Cont…

January 19 – The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced that privately-owned housing starts in December 2016 were at a seasonally adjusted annual rate of 1,226,000 units, up 11.3 percent over the revised November 2016 rate of 1,102,000. Compared to a year ago, housing starts increased 5.7 percent over the December 2015 rate of 1,160,000. Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,210,000. This was two-tenths of one percent below the revised November rate of 1,212,000, but seven-tenths of one percent above the December 2015 estimate of 1,201,000. In 2016, privately-owned housing starts and authorized permits were estimated up 4.9 percent and down nine-tenths of one percent compared to 2015, respectively.

January 20, 2017

January 19 – Preliminary data published by Ward's Automotive show that North American (Canada, Mexico, and the United States) light vehicle production totaled 1.26 million units during December 2016, up 2.8 percent year-over-year. U.S. production increased 2.2 percent y/y, while Mexican and Canadian production increased 13.2 percent and decreased 7.2 percent, respectively. Production of medium and heavy trucks totaled 28,005 units in December, down 19.0 percent from a year ago. In 2016, light vehicle production in North America totaled 17.75 million units, up 1.7 percent over the 17.44 million units in 2015. Total production in the U.S. was up 1.2 percent, while Mexican and Canadian production was up 2.1 percent and 3.9 percent, respectively. Medium and heavy truck production in 2016 totaled 420.8 thousand units, down 18.1 percent from the 2015 total of 513.9 thousand.

Global Trends

January 20 – According to data collected by the International Aluminium Institute and the Aluminum Association, global primary aluminum production totaled an estimated 58.2 million tonnes in 2016, an increase of five-tenths of one percent over the 57.9 million tonnes produced in 2015. In December 2016, global primary production was at an annual rate of 60.9 million tonnes, down three-tenths of one percent from the November 2016 rate of 61.0 million tonnes. The annual production rate in North America (U.S. and Canada) increased two-tenths of one percent over November, but was down 8.7 percent Y/Y. In China, the annual rate of production reached 34.1 million tonnes, off one-tenth of one percent from November, but up 14.6 percent Y/Y. In the Rest Of the World the annual production rate in December was up 2.8 percent over a year ago.

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6Energy

January 20 – According to this week's release by the Federal Reserve Board, the Nominal Broad Dollar Index closed the week at 128.06 on Thursday (Federal offices were closed on Friday for the Presidential Inauguration), increasing two-tenths of one percent from last week's close of 127.75. Last week, the Index fell three-tenths of one percent. Over the last six months, the index is up 4.9 percent, while it's up 1.6 percent over the last 12 months.

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.

January 20 – On the NYMEX, near-month WTI crude oil futures (Cushing, OK WTI Future Contract 1) closed the week at $52.42/bbl on Friday, January 20, up $0.05 (+0.1%) from last week's close of $52.37/bbl. Crude oil prices increased slightly for the week despite a hefty rise in the number of active U.S. oil-drilling rigs raising concerns that rising output from the U.S. could derail efforts by other major producers to rebalance global oil supply and demand. Active U.S. oil-drilling rigs increased by 29 this week to 551. Compared to last year, oil rigs have increased by 41. Brent Crude on London's ICE Futures exchange also closed the week up slightly at $55.49/bbl (+0.1%). Friday's spread between the two was $3.07/bbl, down $0.01 from last week's spread.

January 20, 2017

January 19 – The U.S. Energy Information Administration reported that natural gas spot prices were mostly down across the country this report week (Wednesday, January 11 to Wednesday, January 18). The Henry Hub spot price fell 3¢ from $3.28/MMBtu last Wednesday to $3.25/MMBtu. At the New York Mercantile Exchange (Nymex), the February 2017 contract price rose 8¢ from $3.224/MMBtu last Wednesday to $3.302/MMBtu.

U.S. Dollar

The Aluminum Association

7The 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 OverviewAluminum Statistical Review (Annual Fact Book)Aluminum Highlights (Weekly)Aluminum Situation (Monthly)Summary of Producer Shipments and Inventories (Monthly)

Primary AluminumPrimary Aluminum Production – U.S. and Canada (Monthly)Primary Installed Capacity (Annual)Shipments of Primary Aluminum by Form (Quarterly)

Mill ProductsIndex 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 UseExtrusion 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)

CastingsU.S. Foundry Castings Shipments (Quarterly)Canada Foundry Castings Shipments (Annual)

RecyclingNew 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), MonthlyForeign 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.

January 20, 2017