North America encounters an evident shift in aluminium trade dynamics through Q3 2023, marked by a demand-production gap

The North American aluminum market experienced a significant shift in dynamics throughout Q3 2023, marked by a notable contraction in demand and a subsequent impact on trade dynamics. According to the preliminary estimates drawn by the Aluminum Association in its monthly Aluminum Situation report, aluminium demand in North America shrank by 4.4 per cent to about 20,908 million pounds from Q1 to Q3 2023 versus 19,993 million pounds during the corresponding period of the previous year.

Probing into cause

The chart above shows aluminium demand trend in North America since 2014, indicating that after 2020 the demand grew subsequently in the past two years but again in 2023 it witnessed a fall. Semi-fabricated or mill product demand was 9.5 per cent down year-on-year through Q3 2023. But the downfall was partially offset by strong demand, growing by 14.7 per cent Y-o-Y in electrical wire and cable sector as the electrical infrastructure market remained strong.

Other sectors that demonstrated relatively more optimistic demand for aluminium were sustainable packaging, safe and efficient vehicles, greener buildings, and vital infrastructure, leading to a spike in investments to $6 billion since 2021 for domestic manufacturing operations.

Reflection on trade dynamics

The reduced domestic demand also led to a plunge in the United States aluminium imports, reflecting a decreased need for imported products. According to the US Census bureau data, the United States imported 4.2 million tonnes (including scrap) of aluminium in the first three quarters of 2023 versus 4.78 million tonnes a year earlier. That indicated an annual downfall of 12.13 per cent in the United States aluminium imports through Q3.

Of the total imports from January to September, aluminium crude metals and alloys accounted for 2.91 million tonnes versus 3.16 million tonnes a year ago, aluminium plates, sheets and bars accounted for 765,000 tonnes compared to 1.13 million tonnes, and scrap 530,000 tonnes in contrast with 494,000 tonnes.

It is to be noted here that aluminium scrap imports by the United States increased year-on-year by 7.29 per cent, hinting the country’s preferential shift to recycling and using recycled aluminium.

Present condition of aluminium recycling in the US

According to the Aluminum Association’s findings, the Unites States’ recycling rates for aluminium exceed 90 per cent in many industrial markets like automotive and building. The association also finds that industry recycling efforts in the US save more than 90 million barrels of oil equivalent each year.

It is also interesting to note that the US economy could save more than $800 million each year by recycling aluminium beverage cans. Currently, recycled aluminium makes up 80 per cent of US aluminium production.

Aluminium production in North America

Although aluminium production in the US is increasingly becoming a story of scrap recovery and recycling, primary aluminium production has not lost its sheen. From January to November 2023, North America produced 3.557 million tonnes of primary aluminium, which marked a year-on-year increase of 3.95 per cent from 3.422 million tonnes during the corresponding period of the last year. Until Q3, the output was 2.892 million tonnes, up by 3.25 per cent from 2.801 milion tonnes a year ago.

Despite the demand shrink, North American aluminum producers responded by optimizing production processes to maintain competitiveness in 2023. Producers implemented efficiency measures, cost-cutting strategies, and explored technological advancements to enhance production capabilities.

In the entire year of 2022, primary aluminium production in North America was 3.743 million tonnes. To exceed that amount in 2023, the output must reach above 186,000 tonnes in December. It is possible given the production trend through the first eleven months of the year.

According to AL Circle research estimate, North America’s primary aluminium production in 2023 is most likely to rebound to the output in 2021 at 3.88 million tonnes.

Demand & production analysis

The above data establishes the fact that aluminium production in North America has been more than the demand. Thus, the country has explored diversifying their export markets, resulting in a hike in export volume. According to the Aluminum Association data, North America’s aluminium exports (excluding scrap) increased by 23.1 per cent in the third quarter of 2023. In contrast, aluminium and aluminium products imports fell by over 25 per cent through Q3 2023.

Conclusion

The North American aluminum market in 2023 faced challenges stemming from reduced demand, prompting a shift in trade dynamics with lower imports and increased exports. Producers responded by optimizing production, exploring new markets, and investing in innovation to adapt to the evolving market conditions. The ability of the industry to navigate these challenges and embrace strategic measures will play a crucial role in shaping its trajectory in the coming quarters.