Aluminium is the most abundant mineral in the earth. However, it was not until 1888 when economically feasible process was developed for the production of aluminium. In addition, is does not appear in its pure form. This research paper will investigate major suppliers, price and buyers of the metal and analyze the market for aluminium globally and in the United States.
Pure aluminium is relatively soft metal of white colour with a dull shine caused by a thin coverage of oxide. As metal aluminium have many advantages such as being light, having great strength when alloyed and imperviousness to rust. Moreover, it has a nice appearance. The largest markets for aluminium are transportation, construction, packaging and, of course, machinery and equipment. Canada is a key producer of this metal.
The most important aluminium-bearing ore is bauxite which contains aluminium oxide. It takes 4 tons of bauxite to create 2 t of aluminium oxide, which yields 1 t of the pure metal. Most deposits of bauxite are located in sub-tropical regions. In 1999 in US there were 12 companies which operated 23 aluminium reduction plants. Montana, Washington and Oregon account for 40% of the production. The value of primary metal production in 1999 was $5.5 billions.
The following statistics provides a deeper look into industry in US (1999, in thousand tons): primary production 3,800; secondary production 1,400; imports for consumption 4,000; exports 1,700; shipments from government stockpile excesses 57; consumption 7,500; price average in cents per pound 65, 5; net import reliance as a percent of apparent consumption 30.
In 1999 from purchased scrap the amount of aluminium recovered was about 3.5 million tons. In the year 1995-1998 62% of imported aluminium came from Canada, 17% from Russia, 5% from Venezuela, 3% from Mexico. The world’s smelter production is following (1999): United States 4,260; Russia 3,190; China 2,640; Canada 2,360; Australia 1,770; Brazil 1,220; Norway 996; South Africa 676; Venezuela 640; France 430; other countries 7,240. The world total production is 25,400.
United States are becoming more and more dependent on imported primary ingot. The key reason for this is the decrease in domestic production. The major change occurred in 1994 when Russian metal accounted for 25% of US imported ingot. However, most of the Russian metal was of worse quality. In addition, secondary metal production continues to grow and accounts for almost 35% of US supply.
As already mentioned above, Canada remains the major source of imported metal accounting for almost 60% of primate ingot, mill products and scrap. China is a major recipient of US exported aluminium and accounts for about 40%. Japan was a major importer of US aluminium for many years, however in 1995 the situation began to change and percentage greatly decreased. In 1996 Japan accounted for less than 20% of US exports.
In 1994 the production of aluminium decreased in most countries. In addition, the demand also went down. As a result, prices continued to decline. For example, contract prices were below $150/mt while the spot price was even below the $120/mt in 1995. It is only 25% of the spot price in 1990. At that time alumina was short in supply and prices were as high as $500/mt. As a result of such decline in prices, Alumina business became not profitable to many producers and they had to shut down the production. The operations were stopped at Vialco alumina refinery in St. Croix and alumina facility at Almasfuzito, Hungary, has closed.
However, today the prices are becoming more stabilized and new plants start to open. In Brazil the Alunorte refined has reached its capacity level. New refineries open in India which has the most economically attractive location in the terms of both bauxite availability and operating/capital costs. In addition, Russia is now the world’s second largest exporter of the primary aluminium. Even though the quality is less than of eh metal produced by most Western companies, Russian metal has a lower price which gave it the chance to penetrate markets all over the world.
Since 1970, total aluminium consumption has increased because more and more aluminium is being recycled. Analysts predict that this trend will continue in the future decade. Current economic recovery and growth provide a positive environment for further increase in consumption of primary aluminium. The expected increase is about 2%/year for primary aluminium and 3%/year in total aluminium consumption. It is true not only for American market but also for Asia and Latin America.
It is worth to mention, that more developed countries such as Japan, United States and other in Western Europe have increased the usage of aluminium for an automobile applications. Aluminium beverage cans are more and more recycled and automobile industry is being very reliant on this secondary aluminium.
Government does not intervene into the industry but rather cooperates with the producers to cut down the primary aluminium operating rates in order to reduce excessive supply of the metal, low down the inventories and increase the price. It is done to reach market equilibrium of supply and demand: at the moment production capacity exceeds demand by at least 2 M mt. Such cooperation has been successful so far and resulted in increased demand however prices rose unexpectedly to the unacceptably high level. The price of aluminium is a subject to periodic fluctuation. The price of the metal is only a portion of the finished product’s cost to the end user due to the all value-added services which are performed throughout the manufacturing process.
Some materials may offer only few beneficial characteristics while aluminium profiles offer a complete range of benefits at once. Aluminium is only about one third the weight of iron and steel and it is much easier to be handled, less expensive to ship. It is the best choice for cold weather applications because in fact aluminium becomes stronger as temperature falls. In addition, aluminium does not rust and has corrosion resistance because it is protected by naturally occurring oxide film. It is non sparking metal and is twice as conductive as a cooper. It does not accumulate magnetic charge and can be used for high voltage applications. The list of benefits is very long and proves the usefulness of the metal.
Aluminium can be substituted by cooper in electrical applications; steel can be used in transportation; wood in construction; glass and paper in packaging. Even though the price for aluminium is not stable and changes all the time, this metal is still cheaper and has better qualities as discussed above. The world resources of bauxite are sufficient to meet the global growing demand without excessive increase in price.
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