Rising Aluminum Prices Taking a Grip on Manufacturing and Construction Industries
Aluminum prices are in a state of flux right now, and they will continue to change as the world’s ‘supply and demand’ drivers shift. At the crux of the matter, one should start with a query, “How much aluminum can be manufactured and what products need to this raw material?”
Bloomberg reports that the world’s second-largest brewer Heineken revealed that the cost of freight and the metal used in beer cans would substantially impact their profits next year. While the largest aluminum foil producer, Reynold’s Wrap, insists these prices will cost the company between $400 million and $500 million this year due to rising resin and aluminum costs.
In August 2021, the aluminum price is wedged at $2,599/ton and is anticipated to shoot up at $3,000/ton by next year. China’s power supply woes drive up the costs while cracking down on environment-polluting metal industries. China is the world’s top aluminum producer churning out nearly 75 percent of the world’s overall output.
The production of aluminum is an energy-intensive process, but the benefits outweigh this. It is essential to point out that aluminum production is guzzling a lot of power, as it takes 17,400 kilowatt-hours of electricity to produce 1 ton of aluminum. Compared to simple terms that a typical house in the United States utilizes 877 kilowatt-hours per month. The disparity is significant as you can power up about 20 American homes in a month to produce 1 ton of aluminum. Aluminum compared to steel: it only takes 1/3 of electricity to make 1 ton of steel.
It is unknown to most people who don’t know much about what goes into producing something such as a can from aluminum or how it is made to be so strong and lightweight. For example, more than half of all electricity consumed in Canada is used for manufacturing metal products like those beer cans we toss our leftover pizza slices into! You may not realize that these metals have some pretty unique qualities associated with them. They’re durable enough, even become rust-proof when subjected to galvanizing. Aluminum even propelled the aircraft production industry, accounting for 27% of all aluminum produced going to the transportation sector.
Inspired by globalization, the raw materials industry has gone through a significant transformation. Countries worldwide now have the power to influence metal production and consumption in ways that would have been unthinkable 100 years ago. The construction sector, automotive and airline industry, manufacturing, and several other industries utilize aluminum, the most commonly used non-ferrous metal. Aluminum is an integral part of the food and packaging industry, especially when dining out is shunned because of the pandemic.
An abrupt and dramatic decline in demand was triggered by worldwide shutdowns, unpredictability, and new consumer behavior in the instance of COVID-19. Prices and inventories for aluminum in April 2020 were around 35% lower than what it was two years earlier. The aluminum supply was more than 10% lower just a month earlier. The price of aluminum is more than just a simple cause-and-effect issue. The factors that affect the cost of aluminum are often complicated when figuring out what caused them, making predicting future prices more challenging than ever.