At current prices, analysts said they figured about 50 to 75 percent of the world’s aluminum producers are operating below their cash costs, forcing many smelters to shut down.
Total global cutbacks so far mean production of the metal, used in autos and aircraft and products like kitchen foil and beverage cans, will be down 15 percent this year from 2008.
Aluminum prices firmed initially on the news, but resumed their downswing when a slew of subsequent news suggested that demand recovery likely would stretch into 2010.
“We need a combination of supply and demand adjustments to get the market back into balance so that market prices more accurately reflect the cost of doing business,” said Liinamaa.
“I don’t think we’re going to get the demand side going for awhile,” he added.
At its all-time peak in July, benchmark aluminum on the London Metal Exchange MAL3> reached $3,375 a tonne. It ended at $1,555, less than half that price, on Thursday.
“The world is awash in aluminum. We’re producing more than we need at the margin,” said Robson, noting that around 4 million tonnes of aluminum sit in exchange warehouses. (Source-The Guardian)
We’ve seen this before. I remember a few years ago when San Diego quit recycling glass because it wasn’t being used fast enough to justify the cost of recycling. When people take an active role in recycling and communities get involved in encouraging citizens to recycle the amount of recycled material rises. At some point the supply exceeds demand.
It’s a shame new uses aren’t being explored for recycled materials. If the price of aluminum continues to drop, pretty soon recycling centers aren’t going to want to pay for a material they already have too much of. Recycling will be discouraged and we’ll see an immediate increase in the amount of once recyclable refuse being dumped in the landfill.
Recycling is like any other business. Its success depends on supply and demand. The ideal situation is when supply stays up with demand. Right now we have an imbalance in that scenario. We have ample supply but demand is lessening. Should demand continue to stay low, the need for recycled aluminum will lessen and the prices paid for it will decrease. That removes the motivation for recycling.
It’s idealistic to suppose that people will recycle without encouragement or reward. The reality is that we have to have some inducement to encourage recycling. We need to find new uses for reclaimed aluminum the way we at Cartridge World have created a use for recycled cartridges. We need to keep the desire to recycle burning.
It’s a challenge to young inventors and engineers across America: find constructive ways to make use of our glut of recycled materials. We can also encourage companies like Apple, who just released a aluminum-cased laptop, to use as much recycled aluminum as possible. If recycling is to continue and grow in popularity, we have to have a use for the materials we recycle.