Prices of aluminium have reached a record high – and have been steadily increasing since October last year. In fact, this is the highest aluminium has been since 2008. But what’s causing this increase and what does it mean for our own aluminium consumption in the UK?
According to Nicholas Snowdon, an analyst at Goldman Sachs, this increase in energy prices and fuel costs has created a “very oppressive environment” for industries in Europe, such as aluminium production. In order to turn alumni into the refined metal, we know as aluminium, a lot of energy is required to do so – and production companies simply can’t field the costs in order to fulfil their usual demand.
The energy crisis means that 900,000 tonnes of aluminium smelting capacity is now offline in Europe and Goldman Sachs is predicting a deficit of 2.2 million tonnes of the metal this year alone, with another 1.8 million tonnes deficit in 2023.
Why has the price of aluminium increased?
Situations in Ukraine, unrest in Guinea, and Chinese production have all brought on the price increase, as well as the ever-growing global demand. This is due to more and more companies looking to ‘go green’ – with aluminium being so lightweight, it’s becoming the material of choice for car manufacturers and other industries too. Aluminium is also extremely easy to recycle – although the price for secondary aluminium is now soaring too.
Although many industries are attributing the increase in prices to the Ukraine / Russia conflict, aluminium can easily be traced back to tense situations in China, where pollution is being scrutinised and industries are suffering at the current government’s hands. Electricity is also being rationed, which means the production of aluminium and other metals isn’t as fast as it used to be.
Environmental factors are a big part of the aluminium industry’s price rise. As the production of aluminium uses an extraordinary amount of energy, it’s not just China’s government that’s cracking down on the amount of aluminium produced.
However, aluminium as a whole is a far ‘greener’ process of manufacturing than other metals. Secondary aluminium allows the product to continuously be recycled, reducing the need for further production. However, we don’t currently have enough scrap aluminium to make this process the ‘norm’ – and in the UK, we often export a lot of aluminium scrap to China.
We’re also still seeing the effects of Brexit, especially when it comes to supply. Delays in deliveries and difficulties with shipping have caused backlogs of jobs – and end-users are demanding compensation. This has to be absorbed elsewhere, often meaning increasing costs for other customers in the future.
What about consumer demand for aluminium windows and doors?
It’s not just industry demand and fuel consumption that are generating a shortage in aluminium; consumers are becoming more savvy and realising that this durable and robust material is preferred over the likes of uPVC and wood.
The demand from consumers was also unpredictable – and, of course, we couldn’t go without mentioning the pandemic. After March 2020, we saw a huge increase from consumers for home improvement services and products, including windows and doors. Although many households were hit negatively by furlough schemes and wage decreases, these same households were also saving money on petrol costs and, well, life. Staying at home led consumers to evaluate their living conditions and, for many, that meant making some much needed changes. In fact, more than 5% of UK households anticipated making home improvement changes during the pandemic – that’s around 2.5million people.
How will the price increase affect the supply of aluminium windows and doors?
The general cost of living is increasing exponentially – and it doesn’t appear to be slowing down. With everyday products, such as food in aluminium cans, we can expect to see seemingly innocuous increases in prices – but for larger products, such as aluminium windows and doors, the costs can potentially filter down from supplier to install, and then to end-user.
But with such high demand for aluminium windows and doors by consumers, they’re prepared to pay more for better quality. Aluminium windows are far more energy efficient than their uPVC counterparts too – and with such hikes in energy prices for households across the country, clients and end-users are likely to demand the best material to keep these bills down.
Aluminium is also used in the majority of hardware and components for doors and windows too. The lightweight material creates a luxurious feel, without sacrificing security, making it the go-to for handles, hinges, locking mechanisms, and brackets. End-users must be prepared to absorb the rise in prices for these elements too.
At Framex, we’re prepared to keep our pricing as competitive as possible for our customers, as well as meet supply and demand in a reasonable time frame. Although there are tricky situations to navigate currently, UK businesses continue to thrive and we’re on hand to make sure that demand is met.