Why Is Aluminum Such a Hot Commodity Right Now?
September 1, 2021
Aluminum prices have hit their highest level in a decade, as buyers around the world compete for the metal, which is used in everything from soda cans to airplanes.
Prices for aluminum futures have climbed by nearly a third this year alone, and are up roughly 80% from their low point in May 2020.
The surge is not being driven by scarcity, as aluminum manufacturers have long faced headwinds from the glut of availability in the market. The problem is that the bulk of the metal is being held in Asia, and buyers from Europe and the U.S. are having trouble getting it. Ports are jammed with a backlog of orders from companies trying to restock their inventories and prepare for the upcoming holiday shopping season. This is exacerbated by a shortage of shipping containers and skyrocketing freight prices.
While most industrial materials and produced goods are facing similar challenges as the economy springs back to life after the pandemic. When it comes to aluminum, however, the challenge may be more persistent.
China became a net importer of aluminum last year for the first time since 2009, which means American and European buyers are not buying from the Chinese, but competing against them for the metal instead. The move was initially thought to be China simply taking advantage of slumping prices during the pandemic and looking for an opportunity to stock up. An expert who spoke to the Wall Street Journal challenges this assumption though, arguing that China is likely to keep importing aluminum and invest in energy-intensive smelting operations in Asia in an effort to limit the nation’s carbon footprint. This may mean that higher prices may be persistent.