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Aluminum Highlights

Week Ending: August 2, 2019An update on industry activity and economic indicators

On Thursday, July 25th, the Aluminum Association released a joint letter with the Aluminium Association of Canada, European Aluminium and the Japan Aluminium Association calling for G7 leaders to take action on unfairly subsidized overcapacity and other market-distorting behavior that undermines the sustainable growth of the aluminum industry – in line with the findings and recommendations of a recent OECD report. The letter read:

To: US, EU, Canadian and Japanese G7 LeadersCc: G7 Foreign Ministers and G7 Sherpas

Your Excellencies:

As aluminium association leaders, we have for many years expressed our deep concern about unfairly subsidized overcapacity and other market-distorting behaviour that undermines the sustainable growth of the aluminium industry. The prominent OECD report released earlier this year, “Measuring distortions in international markets: The aluminiumvalue chain,” highlighted how non-market forces were responsible for some of the recent increases in aluminiumsmelting capacities, with impacts throughout the value chain.

The OECD report suggested improvements to the design of trade rules, as well as the need to investigate government support throughout the whole value chain and to better account for the influence of state actors, especially given the dual role of State Owned Enterprises (SOEs) as both recipients and providers of support. The report estimated the state support received by 17 international companies using publicly available information. While most government support was provided in the primary aluminium segment, the OECD demonstrated that the support also provided meaningful benefits and advantages to production further down the value chain. In total, these companies have received up to USD 70 billion in different forms of support over the 2013-2017 period. Notably, 85% percent of the documented subsidies went to just five Chinese firms.

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Market ViewBy: Ryan Olsen, Vice President Business Information & Statistics – The Aluminum Association

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

The Aluminum Association

2Industry Activity

August 2, 2019

July 30 – Preliminary estimates indicate that aluminum demand in the United States and Canada (shipments by domestic producers plus imports) totaled an estimated 12,006 million pounds through May of 2019, an increase of 1.1 percent over the year-to-date 2018 total. Demand for semi-fabricated (mill) products totaled 8,717 million pounds, up 2.4 percent. Apparent consumption (demand less exports) in domestic markets totaled an estimated 10,716 million pounds, up 2.3 percent year-over-year.0

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Estimated Aluminum Demand(Millions of Pounds) 2018 2019

The Aluminum Association Not Seasonally Adjusted

July 31 – Aluminum net shipments (including exports) by domestic U.S. and Canadian facilities totaled an estimated 1,958 million pounds during June, a decrease of 3.5 percent from the June 2018 total of 2,029 million pounds. Shipments of aluminum mill products fell 5.4 percent from the previous year to 1,351 million pounds, while shipments of aluminum ingot for castings, exports and destructive uses advanced 1.1 percent year-over-year, totaling 607 million pounds. Through the first half of 2019, preliminary producer shipments totaled an estimated 12,176 million pounds, 1.6 percent below the like-2018 total of 12,373. June inventory levels totaled an estimated 3,591 million pounds, declining two-tenths of one percent from the previous month, but increased 10.4 percent year-over-year.

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Estimated Producer Shipments(Millions of Pounds)

2018 2019

The Aluminum Association Not Seasonally Adjusted

The Aluminum Association

3Industry Activity Continued…

August 2, 2019

August 2 – The U.S. aluminum industry purchased an estimated 706 million pounds of aluminum scrapduring May 2019, according to aluminum recycling statistics published by the U.S. Geological Survey, Department of Interior, declining 4.4 percent from the May 2018 total. USGS estimates that recovery of aluminum and aluminum alloys totaled 625 million pounds, falling 7.4 percent year-over-year. Through the first five months of 2019, preliminary data indicate that recovery of aluminum from scrap totaled an estimated 3,139 million pounds, a decline of 6.6 percent from like-2018. U.S. exports of scrap, not included in the government’s consumption statistics, totaled 1,788 million pounds through May, up 19.1 percent over the 1,501 million pounds year-to-date in 2018.

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U.S. Secondary Recovery and Exports of Aluminum Scrap(Mill ions of Pounds)

Rec. '18 Rec. '19 Exports '18 Exports '19

U.S. Geological Survey, U.S. Census Bureau Not Seasonally Adjusted

August 2 – Aluminum imports of ingot, scrap and mill products into the U.S. and Canada (excluding cross-border trade) totaled 753 million pounds in June 2019, an increase of 21.8 percent over the June 2018 total of 618 million pounds. Including scrap, which accounted for roughly 62.9 percent of reported aluminum exports in June, exports totaled 581 million pounds, falling 3.1 percent from a year ago. Excluding scrap, exports totaled 216 million pounds, off 23.2 percent from last year. Exports of scrap increased 14.5 percent year-over-year. Through the first half of 2019, imports were down seven-tenths of one percent to 4,818 million pounds, while exports were up 4.7 percent to 3,659 million pounds.

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Foreign Trade - U.S. and Canada(Mill ions of Pounds)

Not Seasonally AdjustedU.S. Bureau of the Census and Statistics Canada

Exports

Imports

The Aluminum Association

4Economic Activity

August 2, 2019

July 31 – Statistics Canada reports that real GDP in Canada increased two-tenths of one percent in May, following a three-tenths of one percent increase in April. Goods-producing industries were up six-tenths of one percent, while services-producing industries edged up one-tenth of one percent. The increase was led by a rebound in manufacturing with 13 out of 20 industrial sectors expanding. Total manufacturing output expanded 1.2 percent in May, continuing its sequence of increases alternating with small declines seen since the end of 2018. Durable manufacturing grew 2.3 percent while non-durable manufacturing edged down one-tenth of one percent.

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

All industr ies

Manufacturing (R. axis)

Statistics Canada Seasonally Adjusted Annual Rate

July 31 – Statistics Canada report that Canada’s Industrial Product Price Index (IPPI) fell 1.4 percent in June, driven primarily by lower prices for energy and petroleum products, which were off 6.9 percent. The IPPI excluding energy and petroleum products was off five-tenths of one percent. Alumina and aluminum production prices fell for the fourth consecutive month (-3.2%), and are now off 17.0 percent from a year ago. The overall IPPI declined 1.7 percent during the 12-month period ending in June.

117.7

100.9

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Canada Industrial Product Price Index2010=100

Statistics Canada Not Seasonally Adjusted

Industrial Product Price Index

Alumina and aluminum production/processing

August 1 – The U.S. Census Bureau of the Department of Commerce reported that the annual rate of construction spending during June 2019 totaled an estimated $1,287.0 billion, seasonally adjusted, off 1.3 percent m/m, and a decrease of 2.1 percent from the June 2018 estimate of $1,314.8 billion. Residential construction ($513.2 billion seasonally adjusted annual rate) fell five-tenths of one percent m/m, and was off 8.0 percent y/y. Nonresidential construction was at a seasonally adjusted annual rate of $773.8 billion, falling 1.8 percent from May (+2.3% y/y). Year-to-date construction spending totaled $615.8 billion, five-tenths of one percent below the $619.0 billion in like-2018.

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U.S. Value of Construction Put in Place ($USD in billions)

Nonresidential Residential

U.S. Census Bureau Seasonally Adjusted Annual Rate

The Aluminum Association

5Economic Activity Continued…

August 2, 2019

August 2 – Total nonfarm payroll employment increased by 164,000 in July, the U.S. Bureau of Labor Statistics reported. The unemployment ratewas unchanged at 3.7 percent, as job gains occurred in professional and technical services, health care, social assistance, and financial activities. Manufacturing employment advanced by 16,000 jobs, meaning the average monthly change for the sector now stands at 13,100 additional jobs over the last 12 months. In total, manufacturing employment has increased by roughly 188,300 jobs over the last year.

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Month-to-Month Change in Manufacturing Employment(Thousands)

M/M Change 12mo. Moving Avg.

U.S. Bureau of Labor Statistics Seasonaly Adjusted

August 2 – The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that total June exports of $206.3 billion and imports of $261.5 billion resulted in a trade deficit of $55.2 billion, contracting 1.7 percent from the revised May deficit of $55.3 billion. Exports during June declined $4.4 billion or 2.1 percent from the revised May total, while imports decreased $4.6 billion (-1.7%). The June decline in the goods and services deficit reflected a decrease in the goods deficit of $0.8 billion to $75.1 billion and a decrease in the services surplus of $0.6 billion to $20.0 billion. Year-to-date, the goods and services deficit increased $23.2 billion, or 7.9 percent, over the same period in 2018. Exports increased $0.5 billion (unchanged), while imports increased $23.8 billion (+1.5%).

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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

August 2 – New orders for manufactured durable goods in June, up following two consecutive monthly decreases, rose $4.5 billion or 1.9 percent to $245.4 billion. This followed a 2.3 percent May decline. Transportation equipment, also up following two consecutive monthly decreases, led the increase, $2.9 billion or 3.7 percent to $80.4 billion. Excluding transportation equipment, June new orders for manufactured durable goods rose 1.0 percent m/m. The value of manufacturer's shipments rose 1.3 percent, while inventories rose three-tenths of one percent m/m in June.

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Durable Goods New OrdersMillions of Dollars

Inventories (Right Axis) Shipments New Orders

U.S. Census Bureau Seasonally AdjustedSeasonally Adjusted

The Aluminum Association

6Global Activity

August 1 – The headline Markit Mexico Manufacturing PMI was at 49.8 in July (June: 49.2) and in contraction territory for the second consecutive month. Faltering domestic and international demand for Mexican goods had a knock-on effect on the manufacturing sector. Back-to-back declines in sales caused further contractions in production and input purchasing, while employment failed to grow for the fifth straight month. Moreover, business sentiment faded to the lowest in the series history and there was a solid rise in stocks amid unsold goods.

August 1 –The Markit Canada Manufacturing Purchasing Managers’ Index (PMI) registered 50.2 in July, up from 49.2 in June and above the 50.0 no-change value for the first time since March. Canadian manufacturers signaled another fall in production levels during July, largely reflecting a sustained decrease in new orders. However, the latest drop in output was the least marked since the downturn began in April. Moreover, manufacturers signaled a rebound in business optimism regarding the year ahead outlook and staffing levels picked up for the third month running. At the same time, input cost inflation eased to its weakest for just over six years, which a number of survey respondents linked to lower steel prices.

August 2, 2019

August 1 – The Markit final U.S. Manufacturing Purchasing Managers’ Index (PMI) posted 50.4 in July, broadly in line with 50.6 in June. U.S. manufacturing firms signaled only a fractional improvement in business conditions in July, with the headline PMI dropping to its lowest since September 2009. Driving less robust overall growth was a slower increase in production and muted client demand. Although the rate of expansion in new business quickened, it remained historically subdued, with export orders contracting for the second time in the last three months. In line with less robust demand, optimism among manufacturers dipped to a series low. Firms were also more cautious towards hiring, with employment falling for the first time since mid-2013.

The Aluminum Association

7Global Activity Continued...

August 1 – The headline Nikkei Japan Manufacturing PMI recorded 49.4 in July, a fractional increase from June (49.3), signaling a third successive monthly deterioration in the manufacturing business environment. Manufacturers in Japan continued to face a challenging business environment in July, according to latest PMI data. Soft demand conditions were a key drag on the sector, with inflows of new work from domestic and external clients falling amid slower global economic growth. Subdued business confidence also persisted into July, with firms discounting charges and reducing input purchasing.

August 2, 2019

August 1 – The Caixin China General Manufacturing PMI rose from 49.4 in June to 49.9 in July, with the latest reading only fractionally below the neutral 50.0 level to signal broadly stable conditions across China’s manufacturing sector. Output was little-changed following a decline in June amid a slight increase in overall new orders. Subdued demand conditions nonetheless prompted firms to lower their workforce numbers again in July, and at a quicker pace, while inventories of both inputs and finished goods declined. Cost pressures weakened, with input prices rising only slightly while selling prices fell. Business confidence regarding the year ahead outlook for output picked up from June’s record low, but remained subdued over lingering concerns regarding the China-US trade dispute and softer global economic conditions.

The Aluminum Association

8Global Activity Continued...

August 1 – The final Markit Eurozone Manufacturing PMI posted below the 50.0 no-change mark that separates growth from contraction for a sixth successive month and, at 46.5, pointed to the sharpest deterioration in operating conditions since December 2012. The downturn in the overall manufacturing economy was driven in the main by a sharp fall in new orders. Latest data showed that the decline was the second sharpest recorded by the survey in just over six years (surpassed only by a contraction in March) as ongoing trade tensions, difficulties in the automotive industry and political uncertainties continued to weigh on demand both in internal and external markets. Export trade deteriorated to the greatest degree since November 2011.

August 1 – The J.P.Morgan Global Manufacturing PMI posted 49.3 in July, a tick below June’s reading of 49.4, signaling contraction for the third straight month and falling to its lowest level since October 2012. Production and new order intakes declined further, as conditions in many domestic markets remained soft and international trade volumes continued to contract. These negative trends filtered through to the labor market, resulting in another round of job losses. Price inflationary pressure remained contained in the global manufacturing sector in July. Input costs rose only slightly and to the weakest extent during the current 40-month sequence of increase. Average selling prices were unchanged over the month, the first time that output charges have not risen in almost three years.

August 2, 2019

The Aluminum Association

9Energy

August 2, 2019

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

Brent

WTI

CME Group Inc.

August 2 – On the NYMEX, the near-month WTI crude oil futures (Cushing, OK WTI Future Contract 1) closed the week at $55.66/bbl on Friday, August 2, down $0.54 (-1.0%) from last week's close of $56.20/bbl. U.S. crude oil prices partially bounced back from a plunge that saw the U.S. benchmark suffer its biggest one-day fall in more than four years after President Trump moved to impose additional import tariffs on Chinese goods. Active U.S. oil-drilling rigs fell by 6 to 770, the fifth consecutive weekly decline. Compared to last year, oil rigs have contracted by 89. Brent Crude on London's ICE Futures exchange closed the week off to $61.89/bbl (-2.5%). Friday's spread between the two was $6.23/bbl, down from last week's spread of $7.26/bbl.

August 1 – The U.S. Energy Information Administration (EIA) reported that natural gas spot prices rose slightly from $2.22 per million British thermal units (MMBtu) last Wednesday to $2.23/MMBtu.

At the New York Mercantile Exchange (Nymex), the August 2019 contract expired Monday at $2.141/MMBtu, down 8¢/MMBtu from last Wednesday. The September 2019 contract increased to $2.233/MMBtu, up 3¢/MMBtu from last Wednesday. The price of the 12-month strip, averaging the September 2019 through August 2020 futures contracts, climbed 1¢/MMBtu to $2.424/MMBtu

The Aluminum Association

10U.S. Dollar

August 2, 2019

July 26 – According to the most recent release by the Federal Reserve Board, the Nominal Broad Dollar Index closed the week at 128.34 on Friday, July 26th, a n increase of six-tenths of one percent from the previous week's close of 127.63. The result is the third weekly increase in the Index over the last four weeks. With the result, the Index has now surpassed its 30 day-moving average for the first time in eight weeks. Over the last six months, the Index has advanced 1.6 percent, while it's up 3.5 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.

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Chinese Yuan to One U.S. Dollar

30 Day Moving Avg.

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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Japanese Yen to One U.S. Dollar

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U.S. Dollars to One Euro

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Weekly Nominal Broad Dollar Index(1997 = 100)

Broad Index 30 Day Moving Avg.

Federal Reserve Board

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

11The 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.

August 2, 2019