Some Aluminum Production Dips Below Costs; Output Cuts Likely If Condition Persists

Aluminum Nov 23, 2011 No Comments

Aluminum canThree-months aluminum fell as far as $2,054.75 a metric ton on the London Metal Exchange Monday, the lowest level in 14 months and down 27% from the May peak of $2,803 a ton.“As a result, increasing numbers of aluminum smelters are becoming unprofitable and are temporarily shutting down production.”

Aluminum prices have fallen below the cost of output for many producers, creating a scenario in which global production may suffer in the months ahead if prices do not recover. Like other base metals, aluminum has tumbled from its highs earlier in the year on worries about the strength of the global economy and thus potential industrial demand, particularly as the European sovereign-debt crisis continues.

Commerzbank said in a daily research note. In particular, this potential exists for higher-cost operations in China, Europe and North America, analysts said. Estimates vary on just how much production globally is losing money. Robin Bhar, senior metals analyst with Credit Agricole CIB, estimated 15% to 20% of global output is unprofitable. Jorge Vazquez, managing director of Harbor Intelligence, suspects it’s around 40%.

via Some Aluminum Production Dips Below Costs; Output Cuts Likely If Condition Persists – Forbes.

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Rod Sherkin

Rod is a former senior executive, responsible for Purchasing, for both Pillsbury and Ball Packaging back in the 80’s and 90’s. Since then, he has continued to work in the Purchasing field as both a consultant and founder of the website Propurchaser.com.

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