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The overall market mood remains fairly upbeat as markets participants welcome the improved economic data out of China and the United States, while hopes of a Covid-19 vaccine is providing the market with extra support. There is a growing acceptance despite rising infections that so long as the death rate is kept to a minimum, the global economic recovery should continue.

In fact, market confidence and optimism is playing a big role here while many economies start to reopen. A global framework and coordinated monetary programs are acting as support for the broader economy and the positive effect has trickled into the base metals complex too, leading to a rebound in the second quarter. But we remain aware that there are still headwinds along the way and any hopes for a V-shaped recovery will no longer be entertained and the newfound reality of a modest W-shaped recovery is being more readily accepted.

Fund managers continued to actively reduce their bearish bets in the LME aluminium complex. The metal’s net short fund position (NSFP) has contracted to 12,193 lots, a new annual low. Gross shorts removed a total of 2,132 lots from their holdings while gross longs were quite content to liquidate their exposure via 491 lots. Although LME aluminium’stechnical configuration favors more upside in the short term, simply relying on short-covering activity may not be sustainable. As such, buying interest from fund managers needs to emerge in the coming weeks or the complex risks renewed downside pressure again.

Going forward, one of two things has to happen, either we start to see metals leaving the exchange system to signal higher physical consumption to complement its bullish technical picture or a significant price correction could emerge if more aluminium stocks make their way into LME and Shanghai Futures Exchange-listed warehouses

Aluminum Highlights

Week Ending: July 3, 2020An update on industry activity and economic indicators

Market View

By: Yang Cao, CFA, Senior Analyst – Fastmarkets MBThe 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.

The Aluminum Association

2Industry Activity

July 3, 2020

June 29 – Preliminary estimates indicate that aluminum demand in the United States and Canada (shipments by domestic producers plus imports) totaled an estimated 7,789 million pounds through the first four months of 2020, a decrease of 18.9 percent from the year-to-date 2019 total. Demand for semi-fabricated (mill) products totaled 5,985 million pounds, off 13.7 percent. Apparent consumption (demand less exports) in domestic markets totaled an estimated 7,087 million pounds, a decline of 16.7 percent year-to-date.

June 29 – Aluminum net shipments (including exports) by domestic U.S. and Canadian facilities totaled an estimated 1,304 million pounds during May, a decrease of 37.9 percent from the May 2019 total of 2,098 million pounds. Shipments of aluminum mill products fell 25.3 percent from the previous year to 1,068 million pounds, while shipments of aluminum ingot for castings, exports and destructive uses declined 64.8 percent year-over-year, totaling 235 million pounds. Year-to-date in 2020, preliminary producer shipments totaled an estimated 8,043 million pounds, 21.8 percent below the like-2019 total of 10,289. May inventory levels totaled an estimated 3,373 million pounds, falling 3.5 percent from the level a month ago, and declining 6.3 percent year-over-year.

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Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.

Estimated Producer Shipments(Millions of Pounds)

2019 2020

The Aluminum Association Not Seasonally Adjusted

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500

1,000

1,500

2,000

2,500

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Estimated Aluminum Demand(Millions of Pounds) 2019 2020

The Aluminum Association Not Seasonally Adjusted

June 30 – According to the Association’s most recentupdate to the U.S. Aluminum Import Monitor –Section 232, 7.6 billion pounds of exclusions have been granted thus far in 2020, taking the total granted volume to 22.6 billion pounds since the Section 232 was implemented. There are currently 2,823 pending exclusion requests, at more than 14.8 billion pounds, the vast majority of which are can stock (8.1B) and sheet products (5.5B). In addition, over 1.0 billion pounds of exclusion requests have been granted for aluminum foil ytd in 2020, with another 713 million pounds pending.

607

638

17623

5

1,72

9

1,03

8

713

2 0 1 8 2 0 1 9 2 0 2 0 Y T D

A L U M I N U M F O I LI M P O R T S V . G R A N T E D / P E N D I N G R E Q U E S T S

Import Volumes Granted Exclusions Pending Requests

(Million Lbs)

The Aluminum Association

3Economic Activity

July 3, 2020

June 30 – Statistics Canada reports that real GDP in Canada declined 11.6 percent in April, following a 7.5% decline in March. April marked the first full month of measures put in place to slow the spread of COVID-19. All 20 industrial sectors of the Canadian economy were down, producing the largest monthly decline since the series started in 1961. Total manufacturing output contracted 22.5 percent as many factories were either completely shut down or operated at a much lower capacity per local and provincial emergency measures. Durable manufacturing dropped 29.2 percent, largely due to a 49.6% drop in transportation equipment manufacturing.

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1,600

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2,050

Canadian Real Gross Domestic Product (chained to 2012 Canadian dollars)

All industries

Manufacturing (R. axis)

Statistics Canada Seasonally Adjusted Annual Rate

June 29 – Statistics Canada report that Canada’s Industrial Product Price Index (IPPI) increased 1.2 percent in May, driven mainly by higher prices for meat, fish and dairy products (+8.3%) as well as energy and petroleum products (+4.6%). The IPPI excluding energy and petroleum products increased 0.8% m/m. Alumina and aluminum production prices fell four-tenths of one percent, and are off 9.2 percent from a year ago. The overall IPPI declined 4.9 percent during the 12-month period ending in May, pulled downward primarily by lower prices for energy and petroleum products (-43.0%).

113.6

94.6

90

95

100

105

110

115

120

125

Canada Industrial Product Price Index2010=100

Statistics Canada Not Seasonally Adjusted

Industrial Product Price Index

Alumina and aluminum production/processing

July 1 – The U.S. Census Bureau of the Department of Commerce reported that the annual rate of construction spending during May 2020 totaled an estimated $1,356.4 billion, seasonally adjusted, contracting 2.1 percent m/m, but rising three-tenths of one percent over the May 2019 estimate of $1,352.9 billion. Residential construction ($543.9 billion seasonally adjusted annual rate) increased 1.1 percent y/y, (-3.9% m/m). Nonresidential construction was at a seasonally adjusted annual rate of $812.5 billion, off three-tenths of one percent from a year ago (-0.9% m/m). Through May, construction spending reached $543.2 billion, 5.7 percent above the $513.7 billion in like-2019.

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1.1

-15.0

-10.0

-5.0

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5.0

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15.0

20.0

U.S. Value of Construction Put in Place (Y/Y Percent Change)

U.S. Census Bureau Seasonally Adjusted Annual Rate

Residential

Nonresidential

The Aluminum Association

4Economic Activity Continued…

July 3, 2020

July 2 – The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that total May exports of $144.5 billion and imports of $199.1 billion resulted in a trade deficit of $54.6 billion, increasing 9.7 percent over the revised April deficit of $49.8 billion. Exports during May decreased $6.6 billion or 4.4 percent from the revised April total, while imports fell $1.8 billion (-0.9%). The May increase in the goods and services deficit reflected an increase in the goods deficit of $4.2 billion to $76.1 billion and a decrease in the services surplus of $0.6 billion to $21.5 billion. Year‐to‐date, the goods and services deficit decreased $22.3 billion, or 9.1 percent, from like-2019. Exports decreased $148.3 billion (-14.0%), while imports decreased $170.6 billion (-13.1%).

30

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60

U.S. Goods and Services Trade Deficit(Seasonally adjusted; $ Billions)

Monthly Deficit 3-Mo. Avg.

U.S. Bureau of Economic Analysis & U.S. Census Bureau

July 2 – Total nonfarm payroll employment rose by 4.8 million in June, the U.S. Bureau of Labor Statistics reported. The unemployment ratedeclined to 11.1 percent, reflecting a continued resumption of economic activity. Employment in leisure and hospitality rose sharply. Notable job gains also occurred in retail trade, education and health services, manufacturing, and professional and business services. Manufacturing employment rose by 356 thousand jobs in June. Despite the growth, the average monthly change for the sector was a decline of 61,900 jobs over the last 12 months. In total, manufacturing employment has decreased by roughly 743 thousand jobs over the last year.

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U.S. Manufacturing Employment & Unemployment Rate

Manufacturing (Left Axis) Unemployment Rate (Right Axis)

Source: U.S. Bureau of Labor Statistics Seasonaly Adjusted

July 2 – New orders for manufactured durable goods in May, up following two consecutive monthly decreases, increased $26.3 billion or 15.7 percent to $193.8 billion. This followed a 18.3 percent April decrease. Transportation equipment, also up following two consecutive monthly decreases, led the increase, $21.1 billion or 82.0 percent to $46.9 billion. Excluding transportation equipment, May new orders for manufactured durable goods rose 3.7 percent m/m. The value of manufacturer's shipments advanced 4.4 percent m/m, while inventories increased one-tenth of one percent in May.

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Durable Goods New OrdersMillions of Dollars

Inventories (Right Axis) Shipments New Orders

U.S. Census Bureau Seasonally Adjusted

The Aluminum Association

5Global Activity

July 3, 2020

July 2 –The Markit Canada Manufacturing Purchasing Managers’ Index (PMI) registered 47.8 in June, up from 40.6 in May and well above the survey-record low seen during April (33.0). Production volumes dropped to the weakest extent since the downturn began, while the latest data signaled the same in new work. Export sales continued to decrease at a faster pace than total new orders in June. A lack of pressure on business capacity and concerns about the outlook for customer demand continued to hold back staff hiring in June, with the latest data indicated a fall in employment for the fourth month running. Meanwhile, input cost inflation accelerated to its fastest for four months in June.

July 1 – The Markit final U.S. Manufacturing Purchasing Managers’ Index (PMI) posted 49.8 in June, up a record 10 points from 39.8 in May, to signal a marked easing in the overall manufacturing downturn. The downward trend in production eased markedly as new orders stabilized amid reports of a relative improvement in demand conditions. Companies reported a further drop in workforce numbers as evidence of spare capacity remained, but the rate of job losses also moderated sharply. Optimism about the year ahead meanwhile revived considerably. At the same time, inflationary pressures picked up, as both input costs and output charges rose for the first time in the second quarter.

July 1 – The headline Markit Mexico Manufacturing PMI registered 38.6 in June, up slightly from 38.3 during May. Latest PMI data pointed to another sharp deterioration in business conditions across the Mexican manufacturing sector as ongoing coronavirus restrictions continued to stifle demand. Consequently, new orders fell further and firms cut production sharply. Working at reduced capacity saw businesses continue to pare back both staff numbers and purchasing activity, which, in turn, led to another fall in cost burdens. Looking forward, goods producers remained pessimistic towards the business outlook, but the degree of negativity continued to ease.

The Aluminum Association

6Global Activity Continued...

July 3, 2020

July 1 – The Caixin China General Manufacturing PMI increased from 50.7 in May to 51.2 in June, to signal a second successive monthly improvement in the health of the sector. Firms signaled a further rise in production and a renewed increase in total new business. The upturn was supported by the recent easing of measures related to the coronavirus disease 2019 (COVID-19) outbreak, which enabled more firms to resume normal business operations and a general improvement in market conditions. However, export work continued to fall amid reports of weak external demand. Nonetheless, business confidence rose to a four-month high, while firms expanded their purchasing activity at a quicker rate.

July 1 – The headline au Jibun Bank Japan Manufacturing PMI edged up slightly to 40.1 in June, from 38.4 in May. Despite increasing, the index remained noticeably below the 50.0 no-change mark. Japan's manufacturing economy was faced with further challenges in June, which showed sharp reductions in new orders, output and purchasing activity. Businesses that restarted their production lines reportedly operated well below capacity as economic conditions both domestically and globally remained fragile amid the ongoing coronavirus disease 2019 (COVID- 19) pandemic. That said, growing expectations of a recovery led business sentiment to jump back into positive territory for the first time since February.

July 1 – The final Markit Eurozone Manufacturing PMI strengthened to a four-month high of 47.4, up from 39.4 in May. The headline index has now recorded below 50.0 for 17 successive months. Manufacturing output declined only modestly in June and to a much lesser degree when compared to the considerable falls seen in recent months. However, production continues to be undermined by ongoing weakness in new order books. New export sales were also down, declining for a twenty-first month and at a noticeable pace. Latest data indicated that firms continued to operate well below capacity during June, with backlogs of work outstanding falling for a twenty-second successive month.

The Aluminum Association

7Global Activity Continued...

July 3, 2020

July 1 – The J.P.Morgan Global Manufacturing PMI rose by a record 5.4 points to 47.8, up from 42.4 in May. Measured overall, the rate of decline in global manufacturing production was the weakest during the current five-month sequence of decrease. The downturns in the three subsectors covered – consumer, intermediate and investment goods – also slowed sharply, taking each closer to stabilizing only two months after April's substantial contractions. The level of new orders fell for the fifth successive month in June, albeit at a much reduced pace. The trend in international trade remained the principal drag, falling for the twenty-second straight month and at one of the fastest rates in the survey history. Manufacturing employment declined for the seventh consecutive month.

The Aluminum Association

8Energy

July 3, 2020

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Crude Oil Near-Month Futures (WTI & Brent)(U.S. dollars per barrel)

Brent

WTI

CME Group Inc.

July 2 – On the NYMEX, the near-month WTI crude oil futures (Cushing, OK WTI Future Contract 1) closed the week at $40.65/bbl on Thursday, July 2, up $2.16 (+5.6%) from last Friday's close of $38.49/bbl. U.S. oil futures marked their highest finish since March, buoyed by better-than-expected U.S. job growth in June, after data a day earlier showed the biggest weekly domestic crude supply decline since 2019. Active U.S. oil-drilling rigscontinued their run of weekly declines (16 consecutive), falling by 3 (185) this week, now off by 603 from the level a year ago. Brent Crude on London's ICE Futures exchange also rose, reaching $43.14/bbl (+5.2%). Friday's spread between the two was $2.49/bbl, down from last week's spread of $2.53/bbl.

July 2 – Due to the observance of Independence Day in the U.S. (July 4th), the U.S. Energy Information Administration (EIA) did not issue a report this week.

Last week, EIA reported that natural gas spot prices rose at most locations (Wednesday, June 17 to Wednesday, June 24). The Henry Hub spot price rose from $1.48 per million British thermal units (MMBtu) last Wednesday to $1.58/MMBtu.

At the New York Mercantile Exchange (Nymex), the price of the July 2020 contract decreased 4¢, from $1.638/MMBtu last Wednesday to $1.597/MMBtu. The price of the 12-month strip averaging July 2020 through June 2021 futures contracts declined 8¢/MMBtu to $2.286/MMBtu..

The Aluminum Association

9U.S. Dollar

July 3, 2020

June 26 – According to the most recent release by the Federal Reserve Board, the Trade Weighted U.S. Dollar Index closed at 120.92 on Friday, June 26, an increase of three-tenths of one percent from last week's level of 120.58. The Index advanced for the third consecutive week, and surpassed it's 30-day moving average for the first time in over a month. Over the last six months, the Index has increased 4.9 percent, while it has increased 5.5 percent over the last 12 months.

The Trade Weighted U.S. 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.

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Chinese Yuan to One U.S. Dollar

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Federal Reserve Board

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Canadian Dollars to One U.S. Dollar

30 Day Moving Avg.

Federal Reserve Board

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116.0Japanese Yen to US Dollar

Japanese Yen to One U.S. Dollar

30 Day Moving Avg.

Federal Reserve Board

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1.20US Dollar to Euro

U.S. Dollars to One Euro

30 Day Moving Avg.

Federal Reserve Board

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Trade Weighted U.S. Dollar Index: Broad, Goods and Services(2006 = 100)

Trade Weighted U.S. Dollar Index

30 Day Moving Avg.

Federal Reserve Board

The Aluminum Association

10The 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)Extruded Products Shipments and Press Utilization (Monthly)Flat Roll Capacity (Annual)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 North American (U.S. & Canada) Imports and Exports by Commodity (Monthly)U.S. Import Dashboard (Monthly)U.S. Aluminum Import Monitor - Section 232 (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.

July 3, 2020