Last month, Catty attended the 10th annual Harbor Aluminum Summit held in Chicago, IL. Each year this summit brings together some of the biggest names and brightest minds in the aluminum industry to network, review, and forecast all things Aluminum. This year’s summit focused heavily around the potential duties on US aluminum imports that have been in the news (Aluminum in the News: What You Should Know), but also outlined many other global market trends surrounding the aluminum industry.
Current Global Production & LME Overview
After several years of fairly consistent decline, the aluminum market has rallied and prices have begun to rise. Since early 2016, the LME has risen 34% and currently sits well over $1,800/Metric Tonne (as of July 2017). One explanation for the increased aluminum costs is the significant increase in aluminum production costs – over the past year, production costs have gone up a full 15%. The other leading factor surrounds speculation in China. Many believe duties on their products are expected to increase which may eventually lead to production cuts from their mills.
Aluminum Production in China
Despite the seemingly inevitability of additional duties on Chinese aluminum products by the US, experts forecast a 13.26% increase in aluminum production in 2017 as compared to 2016. This increased production is expected to take their global market share from 54.02% up to 56%.13%. Chinese profit margins in aluminum production hit a ten year high in 2016 and as long as there are profits to be made, China will continue to produce.
In terms of forecasts beyond 2017, leading indicators suggest Chinese growth will weaken considerably in the next 24 months. The leading factors behind this production include a declining work force, a slowdown in the Chinese automotive sector as well as changes in Chinese government policies regarding aluminum production.
Short Term Global Predictions
As we move beyond China and look at the global aluminum market, experts are predicting production slowdowns. Historical cycles suggest that aluminum production has peaked in 2017 and will enter a 24 month slowdown phase starting 2018. This reduction coincides with predicted global slowdowns in the automotive and construction sectors – two of the largest buyers of aluminum products.
- Base $1795/MT
- Low $1720/MT
- High $1920/MT
- Base $1670/MT
- Low $1500/MT
- High $1820/MT
What this means for Catty Customers
So what does this all mean for you? For one – we anticipate slightly longer lead times in ordering raw foil than we have experienced historically. In the short term we expect foil lead times to be extended an additional two weeks. We will look to counter these extended lead time internally by increasing our safety stock levels and placing foil orders earlier. We ask our customers to support these initiatives by assuring orders are placed as early as possible and working to notify Catty of any any foreseeable demand changes in their products as soon as possible. In terms of pricing, fabrication costs on aluminum foil are expected to increase however we are optimistic that the predicted LME drop will counter-balance the market and believe aluminum pricing as a whole will remain fairly flat.