Friday, July 11, 2008

Aluminum price closes at US$1.48/lb on the London Metals Exchange (LME)

Aluminum prices are soaring... That is obvious. What is interesting is that despite a near 40% rise since the beginning of 2008, record high energy costs, a ever worsening credit / mortgage crisis, a sinking US$ both the aggregate demand and supply of aluminum remain strong.

Aluminum is a relatively labor and energy intensive metal to produce in a pure form which is suitable for use in relatively complex industry and production lines. Record high energy prices of recent have made it so that Aluminum is naturally more expensive to produce.

Second, global efforts (if you go as far to call it an "effort) to combat climate change has also caused the price of producing aluminum to rise. Aluminum producers must account for any damaging effects production causes and either.

Last, and arguably the most significant is the seemingly insatiable demand stemming from the developing world, which despite a 40% rise in the price of Aluminum this year, demand has only continued to increase.

A little outdated perhaps, the chart below indicates by 2005 China's aluminum consumption had grown to represent roughly 23% of global demand, surpassing the United States.

The nice pie chart below breaks down global production of aluminum. The BRIC countries (Brazil, Russia, India and China) alone in 2006 accounted for 45% of total aluminum production. Developing countries have emerged as a signifcant force on both the supply and demand sides of aluminum trade.

It is no wonder, even with record high prices there appears to be little reasons to believe in a price correction or slow down in demand in the near or long term.

Click here to read Business News America's article on rising aluminum prices.