There are indications that the supply shortage that disrupted the commodity market and pushed aluminum prices to a 13-year high this week is unlikely to be alleviated in the short term-this was at the largest aluminum conference in North America that ended on Friday. The consensus reached by producers, consumers, traders and transporters.
Due to soaring demand, shipping bottlenecks and production restrictions in Asia, aluminum prices have risen by 48% this year, which has triggered concerns about inflation in the market, and consumer goods producers are facing the double attack of raw material shortages and sharp increases in costs.
At the Harbor Aluminum Summit scheduled to be held in Chicago on September 8-10, many attendees said that supply shortages will continue to plague the industry for most of next year, and some attendees even predict that it may take up to five year to solve the supply problem.
At present, the global supply chain with container shipping as the pillar is trying hard to keep up with the booming demand for goods and overcome the impact of labor shortage caused by the new crown epidemic. The shortage of workers and truck drivers in aluminum factories has exacerbated the problems in the aluminum industry.
“For us, the current situation is very chaotic. Unfortunately, when we look forward to 2022, we don’t think this situation will disappear anytime soon,” Mike Keown, CEO of Commonwealth Rolled Products, said at the summit, “For us, the current difficult situation has just begun, which will keep us vigilant.”
Commonwealth mainly produces aluminum value-added products and sells them to the automotive industry. Due to the shortage of semiconductors, the automotive industry itself is also facing production difficulties.
Many people who participated in the Harbor Aluminum Summit also said that labor shortage is the biggest problem they are currently facing, and they don’t know when this situation will be alleviated.
Adam Jackson, head of metal trading at Aegis Hedging, said in an interview, “Consumers’ orders are actually far more than they need. They may not expect to receive all of them, but if they over-order, they may be able to get close to what they are expected quantity. Of course, if prices fall and you hold additional unhedged inventory, then this approach is very risky.”
As aluminum prices soar, producers and consumers are negotiating annual supply contracts. Buyers are trying to delay as much as possible to reach an agreement, because today’s shipping costs are too high. In addition, according to Jorge Vazquez, managing director of Harbor Intelligence, they are still watching and waiting to see whether Russia, the world’s second-largest aluminum producer, will keep expensive export taxes until next year.
All of these may indicate that prices will rise further. Harbor Intelligence said it expects that the average aluminum price in 2022 will reach about US$2,570 per ton, which will be about 9% higher than the average price of aluminum alloy so far this year. Harbor also predicts that the Midwest premium in the United States will soar to an all-time high of 40 cents per pound in the fourth quarter, an increase of 185% from the end of 2020.
“Chaos may still be a good adjective right now,” said Buddy Stemple who is CEO of Constellium SE, doing the rolled products business. “I have never experienced a period like this one and faced so many challenges at the same time.
Post time: Sep-16-2021