Aluminum prices hit a record high of $3,450 per ton in February of 2022. Renewed COVID-related restrictions in China, the ongoing war between Russia and Ukraine, and several other global events have further put stress on aluminum supply chains. In this post, we look closely at why aluminum prices are increasing, when they are expected to fall, and how manufacturers can avoid aluminum supply chain issues by purchasing verified aluminum remnants.
Why Are Aluminum Prices Increasing? 3 Key Reasons
A tight supply-demand balance, a low inventory level of aluminum across the globe, and various geo-political events have led to the steep increase in aluminum prices. Below, we detail some of the key reasons that aluminum prices are increasing.
COVID-Related Restrictions in China
China is a leading producer of aluminum, with the city of Baise being a hub for aluminum mining and production. In February 2022, the COVID lockdown affected the movement of workers, raw materials, and aluminum ingots, thereby halting aluminum production. The outbreak also led some alumina refineries in Guangxi to stop operations and further slash aluminum output. Low domestic inventories and high demand from manufacturers surged aluminum prices.
The Russia-Ukraine War
Russia accounted for 6% of global aluminum output in 2021. The ongoing Russia-Ukraine war has led the West to put sanctions on Russian imports. While there has been no direct sanction on aluminum, several countries have refused to do business with Russia, leading to decreased supply of the base metal. Further, Australia has banned the exports of alumina—a key ingredient in aluminum production—to Russia, resulting in production cuts.
Elevated Power Costs in European Countries
Since September 2021, the energy exchange rates have almost tripled across Europe, resulting in higher smelting costs. The shortage of thermal coal, along with a hike in natural gas prices, has caused the power costs to soar. At the current power tariff, the cost to produce one ton of aluminum is significantly high. The elevated power costs have declined the aluminum production month-on-month in European nations. All of these factors have led to constrained aluminum supply and increased costs.
When Will Aluminum Prices Fall?
Aluminum prices have fallen more than 30% since hitting a 13-year high in March of 2022. The prices are still expected to fluctuate for the rest of the year but not rise or drop steeply. The versatility of aluminum as the common base metal used across diverse industries will be driving its global demand. Rising investments in the renewable energy sector, including electric vehicles, solar and wind power plants, and charging infrastructure, will further push aluminum prices.
While the fluctuation in aluminum prices is projected to continue and impact the supply chain, recycled aluminum can address the metal shortage and save energy, money, and resources.
Aluminum Remnants as an Alternative to Expensive, Mill-Sourced Aluminum
Compared to newly milled aluminum, recycled aluminum is a cost-effective alternative. Aluminum is highly durable, corrosion-resistant, and easily recyclable. As a result, parts and products made from high-quality aluminum retain all the material properties and can withstand extreme conditions without degrading. Recycling aluminum has made it possible to still use the majority of all the aluminum ever produced.
One of the most efficient ways to recycle aluminum is using remnant metal left over from large-scale industrial processes. Such remnants can be cleaned up, precision-cut, and reused for machining and other fabrication projects that need smaller pieces of aluminum. Aluminum and other metal remnants are truly sustainable material sources. However, to ensure high-quality recycled aluminum, it is critical to source verified aluminum remnants.
Industrial Metal Service specializes in recycling and supplying high-quality aluminum remnants in the San Francisco Bay Area and beyond. We have more than two decades of experience working with machine shops, fabricators, and manufacturers and gaining their trust as a reliable metal supplier. With our vast inventory that includes aluminum, copper, stainless steel, titanium, angle iron, and specialty metals, along with our cutting-edge metal saw, we are committed to maximizing your savings on material needs. To ensure that the materials meet your specifications, we use Thermo-Fisher XRF analyzers to accurately determine the exact composition of all our metal remnants, including aluminum shorts.