Commodity spotlight: Aluminium and fertiliser prices dip, Goldman is wrong about lithium

Aluminium under pressure

China exported 676,605 tonnes of unwrought aluminium and products in May, the highest volume in 9 years, according to data from the General Administration of Customs. The spike in Chinese exports has turned the country into a net exporter of aluminium.

On the demand side, aluminium smelters in Europe continue to curb production due to high power prices.

Bloomberg's Aluminium futures index made a notable drop on Thursday, down -6.3%.

Perhaps why South 32 (ASX: S32) and Alumina (ASX: AWC) are both down around -4% on Friday.

Source: TradingView

Lithium: Goldman got it wrong

Chinese lithium carbonate prices picked up slightly this week, up around 5% to 474,500 yuan (US$71,000) a tonne.

Source: TradingEconomics

Benchmark Minerals released an interesting piece on 5 reasons why Goldman Sachs is wrong about lithium oversupply. In short:

1. Industry cannot rely on China feedstock to meet market demand

2. Capacity does not equal supply

3. New lithium supply comes at a higher cost base

4. Contract pricing is important as the market balances. There is no single lithium price

5. Understanding how lithium chemical capacity used is crucial

Its worth noting that while Chinese lithium prices are starting to stabilise, ASX-listed lithium stocks have not. The risk-off attitude that has taken over the market has smashed most lithium names down 5-15% this week.

Fertiliser prices fail to keep up with food prices

Affordability has taken quite a toll on fertiliser demand, including urea, potash and phosphate.

North American fertiliser prices have fallen around -25% since March all-time highs.

Source: CRU Group

Its interesting to observe a sharp pullback in fertiliser prices despite relatively high prices for agriculture (cough $12 lettuce).

Notable stocks in this space include:

• Incitec Pivot (ASX: IPL)

As well as emerging potash stocks like BCI Minerals (ASX: BCI), Highfield Resources (ASX: HFR) and Agrimin (ASX: AMN).