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Primary aluminum industry falls prey to energy price hikes
The 2008 financial crisis had a serious impact on the aluminum industry, with global revenues declining over 40% in 2009. Despite two consecutive years of growth in 2010 and 2011, a decline in 2012 ensured industry sales have once again dipped below pre-recession levels.
Analysis shows that the global aluminum industry declined by 11.8% in 2012 to reach a value of $84.5 billion, representing a compound annual rate of change (CARC) of -2.4% for the period spanning 2008-2012.
This was despite growth in the Asia-Pacific region (fuelled by China’s relatively moderate performance), and exceptional double digit growth in the United Arab Emirates. Huge declines in Europe and the Americas ensured the aluminum industry suffered during 2008-2012.
The overall poor performances were a result of 2009 and 2012’s significant declines experienced across all aluminum producing countries, including the UAE and China. North and South America in particular suffered, experiencing CARCs of -9.9% and -9.8% respectively across 2008-2012, with Europe losing almost half of its value in 2009 alone.
With primary aluminum producer’s main customers being the construction and automotive manufacturing industries, the declines these industries experienced during the economic crisis during 2008, as demand for new vehicles and construction projects dried up, correlate with the aluminum industry’s performance. Factored in with the fluctuating prices of aluminum, which are susceptible to economic pressures, the aluminum industry has been far from stable since 2008.
Furthermore, ever increasing energy costs have impacted severely on the power intensive industry. Two primary aluminum smelters were forced to close in the UK in 2009 and 2011 as affordable energy deals couldn’t be reached between utility companies and smelter owners Rio Tinto Alcan. Rio Tinto Alcan’s smelter in Dunkirk, France, is also under pressure unless an affordable power deal can be reached. With energy costs accounting for 23% of total production costs, and energy prices continually rising, the aluminum industry is far from safe as the global economic recovery continues to gather pace.
For more, read our recently published ‘Aluminium Industry Analysis Reports’.