Aluminum prices are trading near their highest levels in almost two years, fueled by soaring demand for raw materials and worries that potential new U.S. sanctions on one of the world’s largest producers could limit global supplies of the metal.
Aluminum, used in everything from jet engines to electric vehicles, has surged more than 40% from its May lows, with contracts for delivery in three months closing at $2056.50 Friday, near the 2020 high of $2064.50 hit earlier this month. It has now gained more than 13% year-to-date.
Gains accelerated Thursday, spurred by fears the U.S. might reapply sanctions on
International PJSC, a Russian aluminum producer and major supplier to Europe. Previous sanctions against the company sparked a steep climb in prices for the metal, disrupting the aluminum industry and threatening profits at manufacturers such as Boeing and Ford.
Aluminum’s recent surge extends a rebound from its early-year drop, when investors feared demand would slide precipitously as auto makers halted production and planes were grounded. Many industrial metals have notched gains recently, fueled by a faster-than-expected recovery in China, a key source of global demand for commodities.
Demand also has come from one unexpected source: beverage cans. Stuck-at-home Americans have stocked fridges with soda, beer and even craft cocktails, outpacing the expectations of can makers including
Crown Holdings Inc.
Trafigura Group Pte. Ltd., one of the largest commodity traders, said in its annual report that the packaging market balanced “severe demand destruction” for aluminum as sales of beverage cans and pharmaceutical products thrived.
Thomas Fischer,
head of investor relations at Crown, said the company started 2020 expecting it would sell out of beverage cans because demand already was increasing, but that Covid-19 accelerated events.
“There has been a lift with the pandemic, but it’s hard to quantify,” said Mr. Fischer.
Beverage companies faced a can shortage earlier this year in North America, prompting can manufacturers to build out production lines. The pandemic accelerated a shift toward aluminum can packaging, fueled by the metal’s light weight and durability, along with its recycling rates. According to the Aluminum Association, the recycled content of an aluminum can totals 73%, outperforming alternative packaging types such as glass and plastic.
“The most sustainable beverage package out there today on every measure is the aluminum can. As sustainability heats up, the popularity of cans heats up,” said Novelis Inc. Vice President
Andy King.
Atlanta-based Novelis makes aluminum sheet bought by packaging makers
Ball Corp.
and Crown, or beverage companies including
Coca-Cola Co.
The North American can market grew as much as 7.5% this year, according to Mr. King, up from a range of 2% to 3% in the past few years.
PLC increased aluminum production in the third quarter by 1% compared with the same period in 2019, according to the company’s most recent operations review. It also teamed up with
the world’s largest brewer, to create new cans in North America using low-carbon aluminum made with renewable hydropower and recycled content.
Philippe Mueller,
head of aluminum trading at Trafigura, said another boost to demand could come from the move toward companies seeking to lower their carbon footprint. A recent World Bank report shows that the metal accounts for more than 85% of solar photovoltaic components. Aluminum also is used in other low-carbon technologies, such as wind and hydroelectricity, and encases batteries in electric vehicles.
Write to Julia-Ambra Verlaine at Julia.Verlaine@wsj.com
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