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    Product manufacturers and end users concern over price and supply disruptions in aluminium

  • China Aluminium Network
  • Post Time: 2018/5/15
  • Click Amount: 250

    The recent aluminium price rise after the U.S. sanction of Rusal, the leading Russian aluminum producer has created concern among buyers and sellers of the metal and also is threatening end user companies with profit drops. During April, aluminium prices swung over their widest monthly range since at least 1997, according to an analysis by WSJ Group.

    The sudden rise in aluminium price threatens to squeeze profit margins of some of the biggest consumers of aluminium while they are already concerned over the higher fuel prices. The unpredictable aluminium prices also have contributed to worries over higher inflation and higher borrowing costs.

    Jeff Henderson, president of the Aluminum Extruders Council, which represents aluminium extruders agreed that aluminium product manufacturers are concerned over the announcement of the sanctions on April 6.

    “The aftereffects were complete shock and awe to the industry,” Mr. Henderson said.

    The higher aluminium prices are expected to be passed on to the manufactures and to the end –users leading to a cost hike for the consumers at the bottom line. 

    Though aluminium prices have started correcting after the U.S. Treasury had extended the deadline for sanction against UC Rusal, the process could be lengthy, and industry analysts are of the view that the market will remain volatile. Russian billionaire Oleg Deripaska, agreed to sell his stake in the company to get it off Washington’s list. Still, aluminium remains 17% higher than before the sanctions with uncertainties looming large.

    The sanctions against Rusal after Trump’s tariffs on steel and aluminium imports have created supply concern among the U.S. buyers further limiting supply options for American buyers. U.S. premiums or the surcharge that is paid for the physical delivery of the metal has also increased because of the supply uncertainties.   Rusal supplied about 12% of all aluminium demand in the U.S. in 2017, according to the Aluminum Association.

    Analysts expect the company’s exports to halve over the next six months as buyers are expected to look for alternative suppliers to source metal before the extension period gets over.  According to Harbor Aluminum Intelligence customers are worried that taking delivery from Rusal might violate sanctions.

    Many end user companies of aluminium say their suppliers are scared because of supply concerns. Mike Rapport, president of Corona, Calif.-based Merit Aluminum Corp., that buys aluminium to make products like window frames and car parts said his suppliers were freaking out.

    Merit Aluminum buys the metal to make products like window frames and car parts. Mr. Rapport said suppliers have cancelled deliveries fearing he won’t be able to meet his own customers’ demands. The company is worried about the proposed expansion to his factory due to supply concerns.

    Some of the world’s biggest steel and aluminium consumers are worried that price and supply disruption of their essential raw material can hit their consumers at the bottom lines. Recently, executives at Whirlpool Corp., Harley-Davidson and Caterpillar Inc. all pointed to rising metals costs as potential headwinds. Boeing Co. and Ford Motor Co. are also monitoring the price movements to strategize their moves.

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