iPhone, beer to Tesla, Inflation will be made of aluminum
Aluminum is the jack-of-all-trades of the metal industry: it’s everywhere, underpinning modern life, from an iPhone to a jetliner to a can of beer. For a long time, however, it was difficult to get excited about it. The metal is just dirt: bauxite, one of the most abundant elements on the Earth’s crust. And the bulls couldn’t count on prices getting a boost if China ran short on it — as the country did with almost all other commodities — because the People’s Republic produced lots of aluminum, too.
The industry joke was that to make money in aluminum, one should sell into any price rally. Not anymore. The fight against climate change — with its rush for the light metal coupled with the shutdown of the dirty power sources that helped produce it — has turned the trade upside down. It’s crippling supply, particularly in China. The result is the hottest aluminum market in 30 years.
The surge matters precisely because of the ubiquity of aluminum in modern life. It’s the most widely used non-ferrous metal, ahead of copper. And because it’s everywhere, the price rally will hit everywhere, too, adding to global inflationary pressures and eating at the margins of many manufacturing companies. Everything from government policy to central bank rates to what you pay for groceries will hinge to a large degree on aluminum.
On the London Metal Exchange, spot prices for the metal have surged above $3,300 a metric ton for the first time since June 1988. Worse, manufacturers are paying eye-watering surcharges above the LME price to get hold of physical metal. For example, European consumers of billets — a widely traded form of aluminum — face a premium of about $1,500 per ton, four times higher than the 2000-to-2020 average.
It’s unlikely to
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