What we observed at the S&P Global Platts Aluminum Conference
Many thanks to the folks at S&P Global Platts for putting on a wonderful aluminum event at the iconic Hotel del Coronado on January 13th through the 15th. Although sunshine was in short supply, it did little to dampen the event. Here are some observations from the event.
Demand
Despite a plethora of geopolitical pressures, spanning from Section 232 to worldwide concerns about climate change, there seemed to be consensus that global primary aluminum demand would increase in the 2% to 4% range in 2019. In an effort to provide lighter, more efficient vehicles, the automotive industry is expected to be a key driver of this demand. Aluminum automotive parts, like the body panels found on the Ford F-150, are poised to become more common in cars, trucks, SUVs and electric vehicles.
Scrap and China
From a supply and demand perspective, China is expected to be in equilibrium for 2019 while it is expected that demand will outpace production in the rest of the world. Speaking of China, their new limit on scrap imports, in addition to import duties on US scrap, has resulted in a glut of aluminum scrap in the U.S., exerting tremendous downward pressure on aluminum scrap prices. To make up for decreased exports to China, scrap shipments to other Asian countries are on the rise.
Final Thoughts
Commodity prices, almost by definition, have the potential to be volatile and the suddenness and magnitude of these changes can be downright frightening at times. It is important to remember that there are hedging tools that can be utilized to protect against adverse price changes for producers, service centers and OEM’s alike.
Merc Morse
Vice President
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