Alcoa's aluminum giant plummeting production is a sign of the company's dead end that was once seen as a symbol of the US industry - Bloomberg reported.
For 127 years, Alcoa, a New York-based conglomerate, has produced light metal furnaces that are used in a wide range of lifestyle products, from saucepans to airplanes. With such a long history, Alcoa is considered a symbol of American industrial power.
Now, with aluminum prices falling to nearly six-year levels, Alcoa is forced to cut its production by a third, according to research firm Harbor Intelligence estimates. If aluminum prices do not rebound, almost all aluminum smelters in the US are forecast to close next year.
That would be a huge shock to the aluminum industry in the US and for workers in the industry, but with little impact on global supply.
According to Harbor data, the decision to cut 503,000 tons of aluminum smelting capacity announced by Alcoa on Monday accounted for 31% of total US aluminum production, but less than 1% of global aluminum production. Over the past decade, aluminum production has shifted to places with cheaper production costs such as Russia, the Middle East and China.
In the past year, global aluminum prices fell 27% due to oversupply, making aluminum production in the US unprofitable. Therefore, the "death" of the aluminum industry in the US comes faster.
Mr. Jay Armstrong, President of Trialco Inc. In Illinois, USA, a business specializing in the production of finished aluminum products such as wheels, said the company now buys 80% of raw aluminum from abroad. Five years ago, the rate of using imported aluminum was only 40%.
"We cannot buy all the raw materials from the US because of the higher price," said Armstrong.
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Since the beginning of the year until now, aluminum prices have fallen by 19% to 1,501 USD / ton at the London Exchange. Last week, this metal price is 1,460 USD / ton, the lowest since 2009.
According to Harbor, the US aluminum smelters can not make profits if the aluminum price is around $ 1,500 / ton and lower. Meanwhile, aluminum factories abroad have advantages in terms of cheap labor, cheap fuel, and cheap money.
For the past year or so, the game-changing factor for the US aluminum industry has been Chinese aluminum.
China's skyrocketing aluminum production has worsened global aluminum oversupply, pushing prices so low that Bank of America estimates more than 50% of all aluminum producers globally fall. loss scene. However, Chinese aluminum producers are still profitable.
According to a study by Harbor, China could account for 55% of global aluminum production this year, from 24% in 2005. By contrast, US aluminum production will decline from 2.5 million tons in 2005. to 1.6 million tons by 2015.
As for Alcoa, when the production cut it announced on Monday came into effect, its capacity had fallen by 45% since 2007.