Articles in Category: Sourcing Strategies

Aerospace may be down, automotive is coming back, albeit going through immense change from internal combustion engine (ICE) to electric vehicles (EVs), but one sector of the aluminum market that is brewing up a storm is the aluminum can market.

Are you prepared for your annual aluminum contract negotiations? Be sure to check out our five best practices. 

Aluminum can market tightens amid pandemic

The media has been awash with reports for months now that the aluminum can market is really tight. As lockdowns hit this year and bars either closed or saw falling attendance, consumers switched to supermarkets and liquor stores for their soft and beer beverages.

Beer and soda sales have held up well and are actually increasing for some. But where brewers and drinks producers sold volume through hospitality outlets and delivered in kegs, they now have to meet demand in six-packs from supermarket shelves.

The switch to aluminum cans has been unprecedented. “For the most part, the North American can industry is sold out for the next 24-36 months, and we don’t see the supply chain catching up to real demand until 2025-26,” Credit Suisse said in a recent report.

According to SPGlobal, U.S. producer shipments of aluminum can stock for the domestic market in the second quarter rose 5.5% year over year to 912.5 million pounds. Meanwhile, in the first quarter, Aluminum Association data show U.S. imports of aluminum can sheet reached 118.18 million pounds. That figure compares with 71.59 million pounds in Q1 2019 — a 65% jump.

And therein lies the problem.

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The widely, if not universally, held belief that globalization is a win-win panacea for growth has never looked shakier.

While President Donald Trump has led the charge on calling out the failings of unfettered engagement with China and all that entails in terms of loss of manufacturing capability and sharing of hard-won technology, he is by no means alone.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Globalization and China

There is a growing groundswell of opinion that the long-held liberal beliefs that engagement would change China’s behavior have proved flawed.

China today is arguably more centrist, more actively and belligerently nationalistic and worryingly less influenced by world opinion than it has been for decades.

And yet it has, from an economic point of view, proved remarkably successful so far.

China’s economy has bounced back faster than those in the West. Furthermore, its economy has recovered faster than even its close Asian neighbors. That is because, in part, the party’s control meant it could enforce harsh — compared to in the U.S. or Europe — lockdown measures in the face of the pandemic. That enforcement extends to continued adherence to social distancing and hygiene standards since.

It is unlikely that a change of president in January, were that to happen following the November election, would have a meaningful impact on U.S.-China relations. A Biden presidency may try to foster a more collaborative international approach. However, the direction would likely be similar.

Europe, too, is following a less bellicose but similar path.

Europe’s investments in China and reliance on China as a trading partner are greater than that of the U.S., for whom China trade still represents a modest percentage of GDP.

Yet, even in Europe, there is increasing talk of decoupling supply chains and restrictions of technology transfers to China. Furthermore, these is talk of restricting Chinese technology companies’ access to the European market.

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copper smelter

Bombardho/Adobe Stock

It was another action-packed week in the world of metals, including coverage from Stuart Burns on the rising copper price, developments in the rare earths sector and the release of the MetalMiner 2021 Annual Outlook report.

The 2021 Annual Outlook is an invaluable resource for metals buyers preparing to set their spend for the year ahead. The Annual Outlook includes analysis of key price drivers, support and resistance levels, and average prices. In addition, the report features detailed analysis of 10 key metals.

For more information on how to subscribe to gain access to this year’s report, visit the dedicated landing page for the 2021 Annual Outlook.

Before we head into the weekend, let’s take a look back at the week that was:

Week in Review, Sept. 7-11 (rising copper price, RARE Act and more)

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MetalMiner 2021 Forecasting WorkshopWe are only two days away from 2021’s MetalMiner Budget and Forecast Workshop on Thursday, Aug. 13, 2020. Many metal buyers are about to lock themselves into pricing for the next 12 months – in a very, very, very unsteady world.

If 2020 has taught us anything, it’s that flexibility is key.

Going into negotiations, buyers have a lot on their minds. A looming recession? Supply and demand all over the place? Will my suppliers stay in business? What will prices do? How will the presidential election potentially affect all of this?

How the heck do I even begin to think about all of the things I don’t know about what’s to come?

Take a deep breath. We can do this together.

Here’s how we plan to help

  • A bummer, but we’re virtual this year to keep things safe. So, you’ll be able to work from the comfort of your own home.
  • Don Hauser, our vice president of business solutions, comes to us after more than a decade of steel buying for John Deere. He’s bought a LOT of steel. Don will be leading some strategy discussions, including walking through some of his John Deere secret sauce. Steel buyers: get excited. 
  • Maria Rosa Gobitz, our new senior research analyst, comes to us from Wood Mackenzie. As a copper, gold and zinc analyst, she’ll lend some interesting insights that we’ve never had before. Copper buyers, you’ll be happy to hear her shed some light on 2021.
  • We know very well how much every dollar counts right now. With that in mind, we’re planning a rigorous discussion around how best to work with service centers and mills for cost savings.
  • We’re launching should-cost models. They’re good, and we can’t wait to show them to you.

As of publication, we only have seven spots left in the live session. It’s FREE for corporate MetalMiner Outlook and MetalMiner Insights subscribers, and $99 for non-subscribers. 

Lastly, if you have questions, feel free to reach out. If not, be sure to register now before seats fill up.

MetalMiner 2021 Forecasting WorkshopMetals buyers should always be looking for every possible edge to manage their spend, particularly amid volatile times (like we’ve seen this year).

In the MetalMiner 2021 Forecasting Workshop, held virtually this year, attendees will:

  • Hear from MetalMiner experts on short- and long-term metals outlooks
  • Beta test MetalMiner’s should-cost models
  • Gain valuable insights vis-à-vis metals spend strategies for the next year

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This has been a volatile year for global markets, with already slowing economic growth compounded by the destructive impact of the coronavirus pandemic.

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If you are a metals purchaser, it is imperative to mitigate risk and keep costs down whenever possible.

Of course, volatile market conditions can very quickly disrupt a buying organization’s approach, whether it’s due to the imposition of new tariffs, the coronavirus outbreak or the oil price plunge (just to name a few recent events with seismic impacts on metals markets).

With that said, changing market conditions require a flexible, knowledge-based approach, including knowing the best times to buy and which contract mechanisms to utilize for each market type.

MetalMiner CEO Lisa Reisman and Vice President of Business Solutions Don Hauser broke down all of the above and more during a webinar Wednesday, June 24, titled “How to Set Your Metal Purchasing Strategy in Volatile Markets.”

The full webinar recording can be listened to on demand from the MetalMiner video archive.

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The Renewables Monthly Metals Index (MMI) fell 2.1% this month. (Editor’s Note: This report also includes coverage of grain-oriented electrical steel.) 

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Airbus has risen to rival Boeing to form a duopoly despite the plane maker operating across multiple countries and, even before the pandemic, facing problems of scale, fragmentation and lack of profitability.

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The COVID-19 pandemic has had wide-ranging impacts on the global economy, disrupting supply chains and depressing commodities markets.

As Deloitte noted in a recent report on COVID-19 — the “black swan of 2020” — the pandemic’s total impact on supply chains is still unknown.

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