Crushin' It Like Quint

That can that Quint is crushing is getting more expensive.

It has been a busy year so far for aluminum. At the time of this writing (4/21/24), aluminum is up 12.6% month-over-month (m-m) and 20.25% in the last three months.

What happened?

Last weekend, the US and UK announced a ban on Russian metals affecting aluminum, copper, and nickel. This ban follows suit with the G7’s campaign to curb Russian revenues from crude and petroleum exports. Previous sanctions on Russian metal producers had been in place, but not the blanket bans that now exist.

Imports of Russian aluminum had already fallen to zero from tariffs in place in the past. US Treasury officials claim the ban will not have any impact on the pricing of aluminum given the global stockpiles that exist.

So we are okay, right?

We’ll see about that.

While Russian only produces about 6% of global aluminum, 91% of the London Metal Exchange’s (LME) stockpile is Russian aluminum. Any aluminum documented as being traded before the ban is safe to use and trade, yet concerns linger about an increase in demand and a global decrease in supply.

China’s demand has increased as the government continues to try to spur economic growth. Global supply has become constrained due to bauxite, a key ingredient in aluminum production. 70% of the bauxite used in China comes from Guinea, which is home to the world’s largest bauxite reserves. The rapid growth of bauxite mining has been fraught with protests, accidents, and safety concerns. China has imposed restrictions and limitations on their own domestic mines, further increasing dependance on the small West African nation, which will hit their rainy season a few months.

Prices also rose on speculation of further increases to rising energy costs and disruptions to Middle Eastern smelters with the growing tensions between Iran and Israel.

How much is aluminum going to go up?

It is too early to tell. 

Count on increased price volatility in aluminum and other base metals in the short-term. China has tried to reboot their economy in the past without success, but don’t dismiss any effort they make despite their factories hitting the lowest capacity utilization rate since the start of the pandemic.

As we head to the Presidential election this fall, both Biden and Trump have announced additional tariffs on Chinese aluminum and steel. Currently there is a 7.5% tariff on the Chinese metals, but Biden is calling to possibly triple that to 25% and Trump is in favor of increasing that value as well.

We haven’t likely seen the peak on aluminum yet. What that ceiling is remains to be seen based on kinks in the supply chain, a level of demand that has not been fully realized, and what a post-election tariff on Chinese metals looks like.

In the near-term, expect aluminum product costs to increase on speculation – storefronts, curtain walls, aluminum doors, etc.