Aluminum Price at 13-Year Highs
Aluminum has hit 13-year highs as we’re writing this in September 2021, and we wanted to explain a bit more why this is. If you’ve noticed the steady increase in aluminum’s pricing over the last few months/years, you’re not going crazy. This year alone, aluminum has gained 41%, reaching its highest level since 2006. That’s sure to turn heads, so why exactly is this usually quite metal on a supercharged rally?
Booming Demand, Short Supply
It comes down to simple supply and demand. And who other than China would be involved? Good news: there is plenty of the silver-colored metal to go around. Bad news: it’s all stuck sitting in Asia. More bad news: shipping containers are in short supply, and major ports are jammed up; thus, getting aluminum to where it is needed is proving to be a challenge. Trade flows are also changing; once a net exporter of aluminum, China has since flipped to a net importer of primary and alloyed aluminum for the first time since 2009. What does that mean? The U.S. is competing for metal with Chinese companies, with stockpiles already sitting over in their territory.
Electric Vehicle Components
Aluminum is lightweight, relatively cheap (for now), and can be a suitable replacement for steel. Gas-powered cars have been made with steel for years, but with the push for E.V.s, and more importantly, affordable E.V.s, we’re going to see many of these companies subbing for aluminum in many of the car’s components. The Jeep Gladiator is an excellent example of a newer vehicle showcasing aluminum closures and structural parts.
External Events That Affect The Market
Repeat after us: scrap prices are affected by external and international events. What are some of these events, you ask?
- Coup in Guinea – More recently, aluminum reached its highest level after a coup in Guinea, a significant supplier of the primary ore used to produce aluminum. So what? The military shut land and air borders, leading to disruptions and putting additional pressure on the market. No aluminum being shipped mixed with lower supply and high demand = a skyrocket in price.
- Jammed Shipping Ports – Previously mentioned, Los Angeles and Long Beach ports are jammed, and containers are in short supply. This is good for the shipping companies but bad for customers like you and I who face rising costs.
- Chinese Production Cutbacks – With increasing scrutiny from the Chinese Communist party regarding highly polluting industries, these cutbacks have fueled aluminum. Looking to cut back on aluminum and steel production to meet climate goals, China may very well be the biggest reason for aluminum’s tremendous price increase.
Suggested Reading: Factors of Scrap Metal Pricing
Hopefully, this helped explain how metals, in this case in time aluminum, are highly susceptible to significant increases and decreases in price based on market indicators like the above. This goes for any metal, and we see it all the time and throughout the years.
