Aluminium price surge hits SA manufacturers

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Aluminium prices have reached a 13-year high.
Aluminium prices have reached a 13-year high.

The price of aluminium surged to $3 000 (~R43 800) per ton this week, breaking a 13-year record - with a knock-on effect on some SA manufacturers who felt the impact of hiked prices in higher production costs. 

The increase was driven, in part, by a rise in commodity prices, sparked by supply concerns after a coup in Guinea - which is a major producer of bauxite, a source of aluminium - as well low Chinese input.

The US's reporting record high inflation led to worry that its Federal Reserve would have to tighten monetary policy, which also contributed to the surge.

In South Africa, Nampak, the country’s largest packaging company, which manufactures aluminium beverage cans, said it had felt the pinch of high aluminium prices. The group said the price hike had influenced the cost of its inventories and required a "substantial" working capital increase.

"The pass through of the additional cost means that aluminium beverage cans will become less price competitive in the short term versus other beverage packaging formats, but only before the net benefits of recycling are considered," said Nampak.

The package maker explained that in the circular economy, the higher aluminium price would result in the increased value of used beverage cans, which would benefit informal scrap collectors.

"Given that aluminium cans are infinitely recyclable, this additional incentive is expected to further increase its recycling rate and potentially boost its status as the most recycled beverage packaging format," Nampak said.

CEO of Hulamin, Richard Jacob, explained that since the company manufactures aluminium products for its customers, it will be able to pass the increased costs to them. But the 2 cents to 3 cents increase is unlikely to affect consumers, since the brand owners will absorb the costs.

Although the current price is the highest it has been in a while, Jacob said it has been higher in the early 2000s.

Some customers may switch to products made from other materials like plastic and wood, said Jacob, but in many cases there is no substitute.

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