Its good to be king, they
say. But short of that, its not too bad being in the
aluminum business right now.
As a number of articles in this
months issue attest, alumina suppliers, mills, service
centers and others in the industry are facing opportunities for
greater profits as well as developments in new manufacturing
processes and new ways of ordering pricing for raw
Just two years ago you
couldnt say the same. The economy was dragging down all
the sectors that aluminum products rely on, there was
overcapacitycreating an oversupply of productand
earnings were not matching previous years.
But starting in 2010, and
continuing into this year, the environment changed
dramatically. Now companies are in much better shape, and
everyone is cautiously, or even joyously, optimistic about the
near-term. Consider the following:
What was up until
summer 2010 an oversupply of material has turned into a
industry has rebounded and demand has been increasing.
growth is projected to continue through the year, building on
gains late last year.
Demand is up in the
double digits over 2009 and 2010.
Profits for many
aluminum producers are healthy this year, after several bad
quarters in 2008, 2009 and 2010.
Not only the U.S. economy
but also overall global manufacturing appears to be heading up
for the near- and long-term.
The opportunities are many. The
thinning and lightweighting of aluminum will help producers
capture more of the sustainability marketplace, which should
help drive demand and profits for some time to come. Being
ready to serve growing demand in more traditional products also
can improve the bottom line.
To be sure, there are still a
number of challenges all along the chain of production,
distribution and sales. For example, aluminum producers are not
the only ones interested in capturing the lighter, greener
marketplace, and steel in particular poses a constant
competitor. So manufacturers will have to invest in new
technologies and processes and be willing to think differently
to grab and retain an advantage there.
The overall economy is still not
completely out of the woods, so careful and forward-thinking
business practices still need to be adhered to. Those companies
that wisely cover the approaching terrainrough as it may
be from time to timewill survive to reach the fabled land
of higher capacity, increased output and greater profits.
Still to be worked out is how
alumina producers desire to move customers to an indexed
pricing mechanism will turn out. Buyers of the key aluminum
input continue to bristle at the prospect of such a change.
As Anne Riley points out on page
30, big producers are pushing for deals on an indexed basis,
but they cant find consumers that readily and
enthusiastically embrace it. The new systemwhich sets
alumina prices based on an index rather than as a percentage of
London Metal Exchange aluminumwas brewing as an idea for
some time, but alumina producers only began to actively
encourage a switch to the new method in the past year.
Alcoa Inc. has transferred about
20 percent of its alumina volumes over to the new system. It
plans on moving the remainder of customers to an index basis in
as little as five years, the company told AMM. Keep an
eye on this project, as alumina indexing is sure to be one of
those challenges that occasionally set off fireworks. The
potential for missteps is still great, as is the possibility of
* * * * *
A speaker at the Institute of
Scrap Recycling Industries (ISRI) annual convention in Los
Angeles said that while he felt assured that scrapyards and
mills had appropriate radiation detection equipment on site, he
still needed to be reassured that such equipment was in good
The aftermath of the Japan
disaster was on many minds at the ISRI convention. Most people
first and foremost were concerned about the wellbeing of the
Japanese people and the struggles they still face. This was
universally the first reaction when the subject was broached,
and it speaks to a basic decency in the hearts of people in the
But sentiment does not easily
become sentimentality in the business world, and at some point
realistic issues need to be considered and addressed. The
radiation question is a crucial one, and the disquiet about the
condition of U.S. safety equipment is reasonable. Yards and
mills in all metal sectors need to do what they can now to
ensure that they will be able to deal with the potential issues
raised by irradiated scrap finding its way into the stream.
Beyond this, exporters are
bracing for what they hope will be increased demand from China,
South Korea and other Asian scrap buyers who may have to turn
to the United States to replace the scrap they normally would
receive from Japan. Steelmakers, aluminum producers and others
also are looking to a long-term market in which they can help
supply the finished products Japan will need to rebuild. Again,
those best prepared for opportunity will be the ones to best
take advantage of it.