Aircraft Manufacturing Recovery May Increase Aluminum Consumption

June 21, 2023

2 mins read

Aluminium prices have been in a downtrend since at least February 2023, which is affecting demand and purchases in the market. Purchasers are trying to minimise buying in anticipation of reaching a minimum price level; there is decreasing volatility in aluminium prices, and market sources expect a price bottom to be reached soon. LME aluminium 3-month prices fell by 4% month-on-month to $2,270/MT in May and based on the dynamics of the first half of June, the decline will be about 1% this month according to market players.

One of the factors affecting the aluminium price momentum is the existence of surplus stocks of the metal. Despite the downward price trend, stocks will likely start declining as soon as purchasing activity picks up, supported by an increase in real aluminium consumption.

In addition to the growth in the global automotive industry, there is also an upward trend in aircraft orders; aluminium and aluminium alloys are key metals for the manufacturing of aircraft as they represent approximately 80% of the total weight of the aircraft without fuel or cargo. Market players state that the uptick in aircraft manufacturing will likely lead to increased aluminium consumption. Since the beginning of the COVID-19 pandemic, the aircraft industry has been facing severe challenges, including air traffic restrictions and a reduction in passenger traffic. As a result, the industry experienced a significant downturn and a shortage of orders. However, as the global economy recovers and restrictions are lifted, the aircraft industry is beginning to show signs of recovery, according to market participants. An important factor affecting the industry is the pent-up demand for new aircraft, which has essentially started to take shape from 2020 onwards. After all, much of the pre-COVID aircraft fleet is falling into disrepair after a pause in orders and needs to be replaced with new aircraft due to the growth in passenger traffic.

Aircraft manufacturing has performed strongly in recent years. In 2021, new orders for aircraft in the US and the EU were up 25%. In 2022, there was an 11.2% year-on-year increase. New orders in the US slowed to 1% in the first four months of 2023, but production rose by 6% in the same period. Despite the significant slowdown in growth, the graph shows that the current level of orders is comparable to that of 2017, which is a strong foundation for aluminium consumption growth in the aircraft industry, which accounts for more than 10% of total aluminium consumption.

Topics: Metals & Ores
Artem Segen

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