Aluminium industry agonizes on the emerging complications of its supply: Industry players at Harbor Aluminium Summit

The hitch in the aluminium supply chain that has agitated the global commodity markets, while propelling the prices to a 13-year high in the previous week is unrealistic to prosper pretty soon.

During North America’s largest aluminium conference ‘Harbor Aluminium Summit’, this was the message which has come from producers, consumers, traders and shippers.

In 2021, the metal aluminium has leapt 48% on gushing demand, shipping bottlenecks and China’s restrictions in production, fuelling inflation disquiets and causing a major hassle for consumer-goods producers encountering intensifying material dearth apace with the strong rise in costs.

However, several participants in the Harbor Summit remarked that the tangled supplies will pursue to torment the aluminium industry through most of 2022, while some predicting that it might travel to five years provided the issue is to be resolved.

Container shipping which is the mainstay of global supply chains is languishing to keep tempo with the demand for goods and subdue labour disarraying caused by the Covid-19 pandemic. Furthermore, worsening the matters in the aluminium industry is the deficit of workers at plants and insufficient truck drivers to supply the available metal.

At the Harbor Aluminium Summit in Chicago Mike Keown, CEO of Commonwealth Rolled Products, said: "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. For us, we think it's just begun. It's kept our head on a swivel this entire time."

The American value-added aluminium producer, Commonwealth sells its products to the automotive industry, which has countered its production issues because of a shortage of semiconductors.

Numerous aluminium-summit participants stated that labour crisis is their biggest challenge, and they are out of any clue when the situation will subside.

Adam Jackson, Director of metals trading at Aegis Hedging, said: “Consumers are ordering more than 100% of their expected needs. They don't expect to receive 100%, 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."

Jorge Vazquez, Managing Director at Harbor Intelligence, said: “The surge in aluminium 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. We are also waiting for indications on whether Russia, the world's second-largest aluminium producer, will keep an expensive export tax into next year.”

Harbor Intelligence said: “All of this could signal further price increases. Harbor’s bull case for aluminium in 2022 is an average price of about $2,570 per tonne. That's about 9% higher than the average so far this year for benchmark aluminium traded in London. Harbor also estimates that the so-called Midwest premium, the amount added to deliver the metal to the US Midwest, will surge to an all-time-high 40 cents a pound in the fourth quarter, which would mark a 185% increase from the end of 2020.”

Buddy Stemple, CEO of Constellium SE's rolled-products business in Ravenswood, West Virginia, said: “Mess is probably a good word. I have never been through a period like this in which you had so many factors at once.”