You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App

NEW SENS search and JSE share prices

More about the app

Aluminium industry frets that supply snarls ‘have just begun’

Global supply chains are struggling to keep pace with the demand for goods and overcome labour disruptions.
Image: Paulo Fridman, Bloomberg

Supply-chain snags that have roiled commodity markets and helped push aluminium prices to a 13-year high this week are unlikely to ease any time soon.

That’s the message coming from producers, consumers, traders and shippers at North America’s largest aluminium conference, which ended Friday.

Moneyweb Insider INSIDERGOLD

Subscribe for full access to all our share and unit trust data tools, our award-winning articles, and support quality journalism in the process.

Choose an option:

R63 per month
R630 per year SAVE R126

You will be redirected to a checkout page.
To view all features and options, click here.

A monthly subscription is charged pro rata, based on the day of purchase. This is non-refundable and includes a R5 once-off sign-up fee.
A yearly subscription is refundable within 14 days of purchase and includes a 365-day membership.

Click here for more information.

aluminium has jumped 48% this year on surging demand, shipping bottlenecks and production curbs in China, stoking inflation concerns and causing a major headache for consumer-goods producers facing worsening material shortages alongside the sharp rise in costs. Snarled supplies will continue to dog the industry through most of 2022, many conference participants said, with some projecting it could take as long as five years to resolve the issues.

Global supply chains, with container shipping as their backbone, are struggling to keep pace with the demand for goods and overcome labor disruptions caused by Covid outbreaks. Compounding matters in the aluminium industry are worker shortages at plants and a lack of truck drivers to deliver the metal that is available.

“For us it’s been a mess, and as we look ahead to 2022 we don’t see this going away any time soon unfortunately,” Mike Keown, the chief executive officer of Commonwealth Rolled Products, said at the Harbor aluminium Summit in Chicago. “For us we think it’s just begun. It’s kept our head on a swivel this entire time.”

Commonwealth makes value-added aluminium products that it sells to the automotive industry, which has faced its own production issues because of a shortage of semiconductors.

Several aluminium-conference attendees said labor shortages are their biggest problem, and they don’t have any idea when the situation will slacken.

“Consumers are ordering more than 100% of their expected needs,” Adam Jackson, the director of metals trading at Aegis Hedging, said in an interview. “They don’t expect to receive 100%, but if they over-order, maybe they’ll land on the right amount and not forfeit sales. Such a practice has a serious risk if prices fall and you’re carrying extra unhedged inventory.”

The surge in aluminium prices comes as producers and consumers negotiate annual supply contracts. Buyers are holding off as long as possible from making agreements because shipping premiums are so high. They’re also waiting for indications on whether Russia, the world’s second-largest aluminium producer, will keep an expensive export tax into next year, according to Jorge Vazquez, managing director at Harbor Intelligence.

All of this could signal further price increases. Harbor Intelligence said its bull case for aluminium in 2022 is an average price of about $2,570 per metric ton. That’s about 9% higher than the average so far this year for benchmark aluminium traded in London. Harbor also estimates that the so-called Midwest premium, the amount added to deliver the metal to the U.S. Midwest, will surge to an all-time-high 40 cents a pound in the fourth quarter, which would mark a 185% increase from the end of 2020.

“Mess is probably a good word,” said Buddy Stemple, the CEO of Constellium SE’s rolled-products business in Ravenswood, West Virginia. “I have never been through a period like this in which you had so many factors at once.”

© 2021 Bloomberg L.P.

COMMENTS   0

You must be signed in to comment.

SIGN IN SIGN UP

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

SEARCH COMPANIES
Enter company name or share code:

ECONOMIC DATA  

  CPIThe Consumer Price Index (CPI) measures monthly changes in prices for a range of consumer products Aug 2021 4.60%
  CPI ex OERThe Consumer Price Index excluding Owners’ Equivalent Rent (CPI ex OER) measures monthly changes in prices for a range of consumer products excluding Owners’ equivalent rent that measures changes in the cost of owner-occupied housing Aug 2021 5.20%
  RepoThe rate at which the Reserve Bank lends money to the country’s commercial banks and set by the Reserve Bank’s Monetary Policy Committee. Sep 2021 3.50%
  Prime lendingThe Prime Lending Rate is the rate of interest that commercial banks will charge their clients when issuing a loan (home loan or vehicle finance) Sep 2021 7.00%
INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us: