The Aluminum Shortage: Trends and Predictions for Future Supply and Demand
Like many of the materials that ended up in short supply over the past several years, we now have a greater appreciation for aluminum as a key component in an array of products across industries.
From breweries and LED lighting manufacturers to those packaging food and healthcare products—as well as many more—shortages of aluminum in its various forms have created supply chain headaches and price increases for both companies and the customers they serve.
As an example, this NBC Bay Area video provides a glimpse at the struggle small breweries have been facing.
Through most of 2022, the shortage of aluminum has been a concern, but some are predicting a light at the end of that tunnel.
Here, we’ll take a look at contributing factors, recent trends, and what may lie ahead when it comes to aluminum supply and demand.
In addition to other supply chain disruptions, two major factors that have contributed to the aluminum shortage are China’s COVID-19 lockdowns and Russia’s war in Ukraine.
In a June article for Supply & Demand Chain Executive (SDC), Bryan Fried of Pangea Global Technologies described the dynamics involved.
“Russia’s ejection from the global economy and China’s new COVID-19 lockdowns are resulting in significant supply chain woes for American manufacturers, especially those who rely on precious imported metals, like aluminum,” Fried wrote. “Scarce aluminum is impacting businesses from breweries to contractors to LED lighting manufacturing. These industries, and more, are being pushed to increase project costs and prices on popular end-user products. …”
Fried noted that China holds the top spot globally when it comes to aluminum exports and that Russia is third behind second-place India.
When it comes to China, there have been additional dynamics in the mix for many years related to the dumping of low-cost aluminum into the U.S. market—which resulted in the closure of some domestic manufacturers. Several Trump-era tariffs were implemented in response. Covering the aluminum foil shortage in a June article for FlexPack Voice , writer Joel Berg described the details.
“Under President Donald Trump, the U.S. countered with Section 232 and 301 tariffs and other measures in 2017 after the U.S.-based Aluminum Association (on behalf of JW Aluminum) successfully filed for antidumping and countervailing duties against imports of light-gauge packaging foil originating from China,” Berg wrote. “Despite the effort to protect them, however, domestic supplies of aluminum continued to shrink. To find what they needed, buyers turned to countries other than China, though China remains one of the world’s biggest producers.”
Protecting America’s Aluminum Interests
The Aluminum Association is still hard at work to protect America’s interests in this context—as evidenced by its testimony during U.S. International Trade Commission (USITC) hearings in July on the economic impacts of Section 232 and Section 301 tariffs programs.
According to an Aluminum Association press release, “Charles Johnson, president & CEO of the Aluminum Association, emphasized how China’s rampant use of industrial subsidies in the aluminum sector has distorted the global market for the metal.”
“The United States is a deficit market for aluminum, meaning it consumes more of the metal than it is able to produce domestically. Consequently, most of U.S. aluminum industry jobs rely in some way on reliable international supply chains,” Johnson testified, according to the statement. “I’m happy to report that the U.S. aluminum industry is globally competitive and growing. However, the industry has faced a distorted global market in recent years driven primarily by massive growth in government-subsidized and state-owned aluminum production in China.”
“In recent years, the U.S. aluminum industry has successfully sought relief from unfairly priced and dumped aluminum in several markets using U.S. antidumping and countervailing duty laws,” according to the release. “These targeted actions have provided vitally important, durable relief to U.S. producers that the USITC unanimously determined were injured by unfairly traded imports from China and, subsequently, other countries.”
“Against this backdrop, Section 301 tariffs targeted specifically at Chinese industrial policy have provided the U.S. aluminum industry with additional support,” added Johnson. “The association believes that 301 tariffs are the appropriate tool to address state subsidized capacity, and should be increased.”
“With respect to Section 232 tariffs, the association and its members did not request relief under this tool, which chiefly aimed to support U.S.-based primary aluminum producers,” said Johnson. “And, while the tariffs have provided some level of stability for aluminum firms up and down the value chain, they have not addressed the fundamental and ever-evolving distortions resulting from China’s rampant use of industrial subsidies in the aluminum sector. Any future actions to alter or remove the tariffs should be undertaken carefully with a stepped approach, and in a way that minimally disrupts the US market.”
The Demand for Aluminum
In his article, Fried outlined various reasons aluminum is so important for U.S. manufacturing, noting that aluminum is:
The “third most abundant metal overall”
In “a class of its own for various uses, including transportation, construction, electrical, and consumer goods”
Used “in transportation for its unbeatable strength to weight ratio”
Environmentally friendly, since “Its lighter weight requires less energy to transport, allowing cost-effective fuel efficiency and lower CO2 emissions”
Resistant to corrosion, which “eliminates the need for anti-corrosion coatings”
A great option “for strengthening infrastructure,” since “aluminum’s low density makes it the best option for long-distance power lines”
In that light, it may come as no surprise that North American aluminum demand was up 6.6% through the first half of this year, according to an Aluminum Association. An August 30th press release described the positive trend.
“As part of its monthly Aluminum Situation report, the Aluminum Association released preliminary estimates showing 6.6% year-to-date demand growth for the aluminum industry in North America (U.S. and Canada) through the first half of 2022,” the statement said. “This is on top of a near 8% year-over-year increase estimated in 2021 and built on demand levels estimated during the first quarter. Since 2021, Aluminum Association member companies have announced more than $3.7 billion in domestic manufacturing operations – including new, U.S.-based greenfield facilities for the first time in decades. Other firms have announced additional aluminum investments in the U.S. in recent months totaling more than $4 billion.”
“We are seeing strong demand and truly unprecedented levels of investment in the U.S. aluminum industry today,” Johnson said. “America is one of the best places in the world to make aluminum and our industry is putting its money where its mouth is to ensure a strong, vibrant domestic industry for years to come.”
Key takeaways from the report include:
“Aluminum demand in the United States and Canada (shipments by domestic producers plus imports) totaled an estimated 14.1 billion pounds through June, advancing 6.6% over the same period in 2021.”
“Nearly all major semi-fabricated – or ‘mill’ – product categories saw increased year-over-year demand growth in the first half, led by sheet and plate products (12.5%) and electrical wire and cable (9.2%). In total, mill product demand grew 9.1% year-over-year through June 2022.”
“Aluminum exports (excluding scrap) to foreign countries declined 18% from the year-ago level.”
“Imported aluminum and aluminum products into North America (US and Canada) have grown 35.7% year-to-date through the second quarter, reaching 4.7 billion pounds. While growing, the year-to-date import levels remain below the level of imports seen over the same period as recently as 2019.”
“A closer look at the demand for sheet and plate products (utilizing the association’s quarterly ‘Sheet & Plate End Use Report’) reveals how growth in the containers and packaging segment has helped drive some of the increase in overall aluminum demand,” the release noted.
“Domestic producer shipments in this segment were up 13.1% year-to-date through June 2022, as companies and consumers increasingly look to aluminum for sustainable packaging solutions. Aluminum cans are the most sustainable beverage package on virtually every measure. They have a higher recycling rate and contain dramatically more recycled content than competing packaging types.”
As far as what the aluminum future may hold, some experts predict that shortages will persist in some sectors well into next year.
However, the title of a Bloomberg article published earlier this month covering trends on the London Metal Exchange (LME) indicates a different type of shift: “Aluminum Stockpiles Jump as Global Demand Slump Leads to Glut.”