Global aluminum supply tension

Global aluminum supply tension is difficult to ease in the short term. 

There are signs 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 - a consensus reached by producers, consumers, traders and transporters at the North American aluminum conference ended on Friday.

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. Consumer goods manufacturers are facing the double attack of shortage of raw materials and sharp rise in costs.

At the harbor aluminum summit to be held in Chicago on September 8th-10th, many participants said that the supply shortage will continue to plague the industry for most of next year, and some participants even expected that it might take up to five years to solve the supply problem.

At present, the global supply chain based on container shipping is trying to keep pace with the vigorous demand of goods and overcome the impact of labor shortage caused by COVID-19. The shortage of workers and truck drivers in aluminum factories has exacerbated the problems of 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 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 attended the harbor aluminum summit also said that the labor shortage is a big problem they are currently facing, and they do not know when this situation will ease. Adam Jackson, head of metal trading at aegis hedging, said in an interview, "Consumers' orders actually far exceed what they need. They may not expect to receive all the goods, but if they over order, they may be close to the quantity they expect. Of course, if prices fall and you hold additional unhedged inventory, this approach is very risky."

The surge in aluminum prices comes as producers and consumers are negotiating annual supply contracts. Buyers are trying to delay reaching an agreement as much as possible because today's freight rates are too high. In addition, they are still watching and waiting to see whether Russia, the world's second-largest aluminum producer, will retain expensive export taxes, according to Jorge Vazquez, managing director of harbor intelligence Until next year.

All this could signal a further rise in prices. Harbor intelligence said it expects the average aluminum price to reach about $2570 per ton in 2022, which will be about 9% higher than the average price of lunaluminum so far this year. Harbor also expects the so-called Midwest premium in the United States It will soar to an all-time high of 40 cents per pound in the fourth quarter, up 185% from the end of 2020.