Supply chain snags that have roiled commodity markets and this week helped push aluminum prices to a 13-year high are unlikely to ease any time soon.
That was the message coming from producers, consumers, traders and shippers at North America’s largest aluminum conference, which ended on Friday.
Aluminum has jumped 48 percent this year on surging demand, shipping bottlenecks and production curbs in China, stoking inflation concerns and causing a major headache for consumer-goods producers facing worsening material shortages alongside a sharp rise in costs.
Photo: Bloomberg
Snarled supplies would continue to dog the industry through most of next year, many conference participants said, with some projecting that it could take as long as five years to resolve the issues.
Global supply chains, with container shipping as their backbone, are struggling to keep pace with demand for goods and overcome labor disruptions caused by COVID-19 outbreaks. Compounding matters in the aluminum industry are worker shortages at plants and a lack of truck drivers to deliver what is available.
“For us it’s been a mess, and as we look ahead to 2022 we don’t see this going away any time soon unfortunately,” Commonwealth Rolled Products chief executive officer Mike Keown said at the Harbor Aluminum Summit in Chicago. “For us we think it’s just begun. It’s kept our head on a swivel this entire time.”
Commonwealth makes value-added aluminum products that it sells to the automotive industry, which has faced its own production issues because of a shortage of semiconductors.
Several aluminum conference attendees said that labor shortages are their biggest problem, and they do not have any idea when the situation will improve.
“Consumers are ordering more than 100 percent of their expected needs,” Adam Jackson, director of metals trading at Aegis Hedging, said in an interview. “They don’t expect to receive 100 percent, but if they over-order, maybe they’ll land on the right amount and not forfeit sales. Such a practice has a serious risk if prices fall and you’re carrying extra unhedged inventory.”
The surge in aluminum prices comes as producers and consumers negotiate annual supply contracts.
Buyers are holding off as long as possible from making agreements, because shipping premiums are so high. They are also waiting for indications on whether Russia, the world’s second-largest aluminum producer, will keep an expensive export tax into next year, Harbor Intelligence managing director Jorge Vazquez said.
All of this could signal further price increases.
Harbor Intelligence said its bull case for aluminum next year is an average price of about US$2,570 per tonne.
That is about 9 percent higher than the average so far this year for benchmark aluminum traded in London.
Harbor also estimated that the so-called Midwest premium, the amount added to deliver the metal to the US Midwest, would surge to an all-time-high US$0.40 a pound in the fourth quarter, which would be a 185 percent increase from the end of last year
“Mess is probably a good word,” said Buddy Stemple, chief executive officer of Constellium SE’s rolled-products business in Ravenswood, West Virginia. “I have never been through a period like this in which you had so many factors at once.”
Other commodities:
‧Gold for December delivery fell US$7.90 to US$1,792.10 an ounce, posting a weekly decline of 2.27 percent.
‧Silver for December delivery fell US$0.28 to US$23.90 an ounce, declining 3.63 percent from a week earlier, while December copper increased US$0.16 to US$4.45 a pound, dropping 2.7 percent week-on-week.
Additional reporting by AP
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