From time to time, we like to check in on the commodity prices that fuel the electrical industry. Raw materials like copper and aluminum are huge market influencers that impact the pricing and availability of popular products that fill electrical distributor shelves. As you may know, things like labor tensions in South America or weather conditions in China can dramatically shift market conditions throughout the globe.
Last Monday, Aluminum climbed to its highest pricing levels since 2008. Benchmark aluminum on the London Metals Exchange settled in at $3022.50/t after peaking at $3,033 earlier in the day. This increase is being spurred on by rising energy costs, cuts to production output, supply chain factors, and increases in the raw materials that make up metal. To better understand, here are a few specifics factors that are leading to a rise in global aluminum pricing.
Prices of alumina, a raw material used to make aluminum, have surged on the Comex exchange to a three-year high of $478 a tonne. (Comex is the entity formed from the merger of the New York Mercantile Exchange and Commodity Exchange Inc. This is the world’s largest physical futures trading exchange.)
Bottlenecks in transportation are pushing up costs for global aluminum miners. Experts and mineral company insiders state that the supply chain bottleneck is likely temporary and should get back to normal conditions next year.
Decreased energy supplies have elevated global energy prices and are resulting in increased mining costs. Energy prices and availability are also affecting the refining and transporting of aluminum raw materials as well as finished aluminum products.
China, the world’s largest aluminum producer has reduced production for multiple factors. The Chinese government’s anti-pollution drive has scaled back available sources of energy, causing a series of power shortages that have gripped the country. This energy crunch is also being felt by producers in India, Spain, and the Netherlands, lowering aluminum production to varying degrees in these countries.
Experts forecast further increases by year-end but suggest that the price of aluminum may level off if the global economy continues to weaken. A weaker economy would mean decreased demand which would help derail the rally. Analysts predict that further supply disruptions will reduce Chinese aluminum output by 1.5 million tonnes for 2021, leading to a 1-million tonne deficit in the roughly 65-million tonne global market. However, some experts estimate a decline in demand from China that could contribute a bit of pricing relief from added stockpiles.
Despite a challenging supply chain environment due to global business conditions, DWC is well-stocked with aluminum products and ready to help our electrical distribution partners serve their customers. For quotes or questions on the full spectrum of specialty wire & cable, speak with your DWC Account Manager today!