Light-Weight Aluminium is the Markets’ New Heavy-Weight

The end of the second quarter saw aluminium regain the shine that it had temporarily lost in the last few weeks of June.

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The light metal closed at 1913.36 dollars per metric tonne on 30 June 2017, up from 1868.99 per metric tonne a week ago. 

A sigh of relief followed the rise, as aluminium, in mid-June, had fallen to its lowest since mid-February.

The gain was in part, due to the improvements in the China Manufacturing Purchasing Managers Index, coupled with a weaker US dollar.
The small but worrisome slump in aluminium prices in June, has been attributed to the market’s reaction toward rising supplies and exports from China, as well as to lower output costs and higher inventories.

The aluminium giant, despite repeated promises to slow down and even cut-back production, seemed to do quite the opposite.

In fact, according to the International Aluminium Institute, China’s aluminium production jumped by 6 percent to 2.825 million tonnes in May 2017, compared to the same month last year.

And the first five months of 2017, saw an increase of 11 percent in production, compared to the same period last year.

Chinese aluminium stocks in May were, reportedly, more than 430,000 tonnes; four times the January 2017 average of 113,495 tonnes. Warehouses in Shanghai supposedly store the excess aluminium, ready for future exports.
China wasn’t the only nation accelerating output.

Russia too, decided to join the production-hike bandwagon, with the aluminium giant Rusal announcing plans to boost its output by a whopping 19 percent, to 4.4 million tonnes by 2021.

This points to something else.
The recent slump in aluminium prices has been disproportionately slight, when compared to the news of the huge quantities of aluminium being churned out by Russia and China.

Why?
Among the factors that influenced this slightly skewed ratio, is the simple explanation that aluminium demand continues to increase, as ever more applications for the metal are discovered.

Experts at Rusal expect global demand for the metal to rise by 13.5 million tonnes to 73.2 million tonnes, over the next five years.

More positive vibes emanate from the US where the new government intends to inject 1 million dollars into building national infrastructure.

Predictably, the transport sector too, demands increasing quantities of the metal, partly due to producers’ interest in eco-friendly, fuel-efficient alternatives, and partly due to cost.

On top of these, markets see China’s constant, albeit protracted, reassurances to crackdown on illegal smelters, along with its efforts to reduce production capacity in 28 of its smelters, as reasons to remain hopeful.

Such promises are kept afloat by associated facts.

Along with aluminium, the Chinese government, in their efforts to contain pollution, intends to shut down at least a small number of coal industries as well.
The country’s energy intensive aluminium smelters receive nearly 90% of their energy requirements from coal.

In view of low electricity supplies, this could result in higher electricity costs, in turn affecting production costs.
Another reason for analysts to be bullish.

The only uncertainty seems to be whether the upward climb will be smooth or not.
That is, will China’s future pollution control measures immediately boost the aluminium market, or will a preemptive over-production strategy cancel out the benefits of any potential production cuts, in the near term?

Whatever the doubts, key players in the field seem to be enthusiastically ploughing ahead with their plans for growth.

The four biggest aluminium companies in the world (outside China), namely Alcoa, Norsk Hydro, UC Rusal and Rio Tinto, are cruising ahead at full speed.
Though referred to as the Big Four of aluminium, these companies are not exactly the same, when it comes to deliverables.

Rusal and Norsk Hydro are the heavyweights in primary aluminium, Rio Tinto is the largest producer of bauxite, while Alcoa is the largest producer of alumina.
Their sheer size of operations allows them to gain significant discounts by signing long-term agreements for alumina and carbon.

Besides, all four have their own power plants, buffering them from the shock of fluctuating market conditions, that often cripple their smaller counterparts.
As if to drive home these points, Norwegian metal firm Norsk Hydro, in July 2017, announced that it will take full ownership of aluminum products-maker Sapa by buying the remaining 50 percent stake that it did not already own, from the conglomerate Orkla.

This makes Hydro the only smelter in the global aluminium industry that is fully integrated across the value chain and markets.

The strong performance of these companies in the first quarter of 2017, seem to justify long-term predictions of the metal averaging between US$ 1850 – US$1900 per tonne, over the rest of the year.

There is little doubt, then, that the mood is upbeat – even Liberty House, whose claim to fame lies in its efforts to save Tata’s steel plant in Wales, the UK, from closure, is now eyeing the aluminium market.

Judging from its strategy, the company, which invested heavily to recharge the UK steel industry, is taking its foray into aluminium seriously.
The steel giant has poured cash into expanding its aluminium assets by acquiring UK’s last aluminium smelter at Lochaber in Scotland, from Rio Tinto last year.

In the pipe line, too, are plans to build a plant that will make two million alloy wheels a year for the automotive sector, in the country.

Interestingly, the company has also hired a prominent and highly-experienced aluminium expert from the US to oversee its aluminium debut in the UK.
This in turn reveals something else - the aluminium sector has grown so much as to boast its own league of experts.

Big names in the industry have come to recognize that the sector is significant enough to deserve the best, especially in the form of talent and training.
And on occassion, that talent search has been extended to include the public.
A case in point is Emirates Global Aluminium, a key aluminium player in the GCC market.
The company recently announced a robotics competition that challenges students at universities and higher educational institutions in the UAE, to create a robot capable of tackling real challenges at EGA’s smelters.

Specifically, the students have been asked to design, build and operate an autonomous robot capable of laying the brickwork lining of ‘pots’ in which aluminium is smelted, a task usually done by hand.

Cut across the globe to the UK, where the need for expertise has given rise to courses and modules that offer aluminium training to engineers.
The country’s top aluminium body, The Aluminium Federation, commonly known as ALFED, has developed an intensive two-day technical workshop, titled Aluminium for Engineers.

The course, the first of its kind, will benefit workers who are increasingly having to deal with aluminium in place of steel, across the full range of manufacturing, construction and design requirements.

It is a requirement born not only out of the popular industrial transition from steel to aluminium, but also out of the need to keep changing the designs of existing brands, in a highly competitive fast-moving consumer goods market.
Brands that have so far steadfastly held on to their traditional aluminium designs, are opening up to change.

Recently, PepsiCo made its followers’ eyes pop with its new aluminium bottle designs for its popular cola beverages.

The designs, conceived by Karim Rashid, a designer based in New York, offer an elegantly-tapered aluminium bottle that will not be available to purchase – you would need to be invited to one of the brand’s exclusive events to see, touch and sip from it.

The renowned industrial designer, after four years of research, stuck to aluminium to create a slick new look and feel to the bottle.

After years of trial and error, it can be safely said that aluminium has finally broken into a stronghold previously held by steel, copper, brass and even glass – design in day-to-day consumer durables.

Increasing numbers of designers, architects and artists are turning the shiny metal into objects of enduring beauty - and utility.
The students at a grammar school in Hertfordshire in Wales, UK, would vouch for that.

Solardome Industries, the pioneer and world leader in the design and development of aluminium geodesic domes, designed, built and installed a dome at Watford Grammar School for Girls, in Hertfordshire, in the UK.
The structure, set up on the roof of the school, has been fully kitted out as a multi-research facility with 12 laboratory work counters, for A-Level science students.

The dome, which resembles a circular crystal when it is lit up at night, seems to complement the clear night sky in rural Hertfordshire.

Another example of aluminium’s unusual design capabilities.
And another reason why the shiny metal is currently the rage amongst the 21st century’s top designers.

 

References:

The Economic Times

Economics Times

Economictimes.indiatimes

Agmetalminer.com

Economictimes.indiatimes

​LME.com

Infomine.com

Alfed.org.uk

Alfed.org.uk

Aluminiuminsider.com

Libertyhousegroup.com

Aluminiuminsider.com

Dezeen.com

Reuters.com