Aluminium, alike other metals, is a commodity price-measured against other foreign currency by the LME (London Metal Exchange). Fluctuations in supply, demand, global economics and global trade-relationships can all have a large effect on the price of aluminium.
Vehicle producers, electrical consumer goods creators, beverage suppliers, transportation engineers and home improvement companies are all industries that rely on the steady supply of aluminium to manufacture their products. As the globe recovers from the COVID-19 pandemic, aluminium pricing has seen a consistent increase over the past 12-months to near record-highs, causing problems in many of these industries.
Why are aluminium prices rising?
One of the largest factors in aluminium price rises involves China and its government’s efforts to kick-start the economy post lockdown. China is currently importing more aluminium that it is exporting to meet increased demands for consumer products – and as the largest goods manufacturer in the world, this is having a large impact on the industry as a whole. The same is happening across Europe, with a higher demand from industries such as vehicle manufacturing prompting an increase in aluminium imports.
This rise in demand comes directly after a period of time where aluminium manufacturing across the globe fell as a result of lockdowns – a lack of spending on aluminium goods and aluminium manufacturers unable to operate at full capacity caused output to stifle in the first half of 2020. Aluminium producing countries such as Canada, Russia and The Netherlands have seen aluminium production slow down dramatically in the past 12 months in response to the pandemic. This has caused backlogs in the global supply chain of aluminium as lockdowns have eased and demand has increased. This supply-demand imbalance is a major factor in the general price increases in aluminium over the past 12 months.
Higher logistical and transportation costs have also had an effect on aluminium pricing. Due to COVID restrictions in many countries – trade import and export has generally been slowed down as haulage and logistics transportation companies have had to adhere to a greater level of red-tape and restrictions whilst transporting goods. This inefficiency and the need to overcome new rules and procedures has increased general haulage costs, and the price of this has been reflected in the price of aluminium itself.
The increase in aluminium prices is stark to see.
From a low of £1450 USD per ton of aluminium at the beginning of the pandemic in April 2020, aluminium prices have increased drastically to around £2500 USD per ton in June 2021, a 72% increase.
Ultimately, the increase in aluminium pricing will work its way down the chain and in reality it is the end consumer that will feel the effect most, with aluminium products eventually costing more as companies raise their own prices in order to maintain a profit margin on their business activities.
Green Space UK install aluminium conservatory roof panels and the rise in price of aluminium has meant a higher cost of sale. “The aluminium price rise has definitely had an effect on our business”, says Brennan Jacomb, Managing Director of Green Space UK, “unfortunately we have had to put our prices up by about 10% in order to cover the increased cost of aluminium. If we hadn’t done so we would be operating at a loss and it is a shame because it is our customers that are ultimately feeling the end cost with the price rise, it is of no benefit to the business itself”.
As with most financial and product-based commodities, it is difficult to predict the future of aluminium pricing in the face of uncertainty regarding COVID-19. It is unlikely that prices will drop considerably in the coming months, but most experts believe that a levelling off is likely, and it is likely there will be a small drop from the current peak in pricing once the supply and demand chain has caught up.
What is undeniable, however, is that as most countries look to kick-start their economies with stimulus packages, consumer confidence means that demand for aluminium across the globe is going to remain high and an increased level of pricing for the metal looks likely to remain for the foreseeable future.
Written by Lewis Treleaven, 3rd June 2021