NEW YORK (BLOOMBERG) – There’s a widening scarcity of essential raw materials for aluminum used to make automobiles and building supplies that threatens to worsen a supply squeeze that already has pushed U.S. prices close to all-time highs.
Matalco, the largest U.S. producer of aluminum billet, is warning customers it may curtail output and ration deliveries as soon as next year amid a magnesium shortage.
Difficult-to-source supplies of other raw materials and soaring natural gas prices are adding to the challenges, Matalco said in a letter to customers obtained by Bloomberg News.
Alcoa, the largest U.S. maker of raw aluminum, also voiced concerns about magnesium scarcity and has been seeing so-called force majeure declarations by some suppliers. Force-majeure clauses are embedded in sales contracts to allow suppliers to suspend deliveries owing to circumstances outside of their control.
“In the last several weeks, magnesium availability has dried up and we have not been able to purchase our required Mg units for all of 2022,” Matalco said in the Oct. 13 letter. “
The purpose of this note is to provide this advanced warning that, if the scarcity continues (and especially if it becomes worse), Matalco may need to curtail production in 2022, resulting in allocations to our customers.”
Matalco and Alcoa both noted that silicon also is in short supply. That shortage, sparked by production cuts in China, sent prices up 300 per cent in less than two months. Aluminum billets can’t be produced without magnesium and silicon, which are essential hardeners for alloys.
Alcoa has been enjoying such a strong rally in 2021 that the company is finally paying a dividend to its shareholders. The company will pay out a 10-cent dividend to be paid on Nov 19 for stockholders of record at the close of business on Oct 29.
The company also announced a share repurchase program of US$500 million. Alcoa’s stock has nearly quadrupled from a year ago, helped by a historic surge in aluminum prices.
The metal used in everything from automobiles to MacBooks to beer cans has gotten a boost from supply chain snags and a global shortage amid surging demand. The biggest U.S. aluminum producer reported earnings before interest, taxes, depreciation and amortization of US$728 million, higher than the US$697 million average of analysts’ estimates compiled by Bloomberg.Internet Explorer Channel Network