Aluminum producers are expected to be under increasing pressure as the aluminum ‘all-in’ price (London Metal Exchange cash price + premium) has fallen over the last few months on the back of lower global premia, while the LME aluminum cash price has largely remained unchanged.

As the graph above indicates, the LME cash price has traded in a tight $180/mt range for most of this year — practically unchanged from levels seen back in mid-October and mid-December. At the same time, the Platts European duty-paid aluminum premium assessment has come off around $350 since mid-November when it peaked at a record high of $500-510/mt. Platts assessed duty-paid aluminum at $150-160/mt plus LME cash, in-warehouse Rotterdam May 11.

In theory, the lower all-in price should start to eat into smelter margins and see producers under increased pressure. One analyst source has forecast that over 10 million mt of global capacity is now loss-making at current all-in price levels and notes that producers are now much more exposed to LME price movements without the cushion of elevated premia.

Recent end-user destocking and evidence of metal exiting warehouse finance deals has also increased availability of aluminum in the physical spot market, adding to pressure on producers.

While exports of semi-finished aluminum products from China have seen growing concerns over increased supply in the physical spot market, December shipments peaked at just less than 500,000 mt. Meanwhile, primary aluminium and aluminium product exports from climbed by over 30% year-on-year to 430,000 mt in April.

The Chinese government also recently removed a 15% export duty on certain alloy and semi-finished products (product codes: 76042910, 76041010 and 760120) that could arguably see more primary metal exit China disguised as semi-finished product.

In April, Russian aluminum producer Rusal announced it was considering the possibility of curtailing 200,000 mt/year of its smelting capacity this year and confirmed that it did not plan restarting any of the 150,000 mt/year capacity it cutback in 2013.

If current market conditions persist in the global aluminum market, it seems likely that there could be similar announcements in the near-term.