Aluminum Sector Analysis in Brazil

Growing demand for aluminum in Brazil is powered by the packaging, transportation and construction industries. Aluminum foil is used in flexible packaging and many consumer products are making the transition in packaging material, leading to greater demand across the world.  Increases in demand for transportation and construction needs are powered by the 2014 World Cup and the Rio 2016 Summer Olympics, where extrusion-related programs include stadiums and airports. The Brazilian Aluminum Association (ABAL) technical director Arton Filletti says “We also see great potential for extrusions in other modes of people transport, such as railways, urban surface trains and subways.” He also sees potential in the shipping and offshore industry.

Four industries account for three fourths of aluminum consumption in Brazil: packing, transportation, construction and electricity.

 

Aluminum is on the rise in the auto industry and has plenty of room for growth in Brazil. In 2013, vehicles produced domestically have average aluminum content per vehicle at around 110 pounds. In leading markets such as the U.S. and Europe, average aluminum content per vehicle exceeds 300 pounds. Inovar Auto is a government program established to boost vehicle technology innovation should raise demand by the industry as well as tax breaks for cars that reach a set level of energy efficiency. Demand should increase for aluminum since it is known to make cars lighter and run more efficiently.

Last year, Brazil dropped to 8th from 6th largest producer globally as production of primary aluminum fell 9.2%. The main barrier is poor competitiveness in the cost of electricity. The loss of competitiveness will mean that Brazil will have to become a net importer of aluminum. The People’s Republic of China remains at the top of the list and Shanghai Metal Corporations is a leading manufacturer in Aluminum sheets and plates committed to providing value-added quality products with competitive pricing and prompt delivery. Our group of competent engineers develops and improves our products using specially design and advanced equipment to meet the special needs to our clients. To find out more about our wide variety of products check out our website here.

Sources: The Brazilian Aluminum Association (ABAL), Bain & Company

Kristie K.//SMC Editor

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Competitiveness Fears as German Wages Rise

The steelworker’s strikes that immobilized production all of last week been finally resolved after a massive deal. The largest trade union in the European steel industry – Germany’s IG Metall – has negotiated a 4% salary increase for its members. Last week IG Metall had called strikes at plants operated by steel companies including ThyssenKrupp, Salzgitter, ArcelorMittal and Finland’s Outokumpu. The 75,000 employees concerned have been promised a two-stage increase in wages, beginning with 2.3% increase from July followed by a further 1.7% from May 2015. That is less than the 5 percent over 12 months the union had demanded but is well above the rate of inflation in Germany, currently at around 0.9%.

Efforts by governments across the European Union to cut their budget deficits in the past two years have squeezed companies and consumers, hurting the steel industry by curbing demand for cars, appliances and new buildings. The fear now is that the industry will lose its competitive edge to countries with less significant labour costs in what is now a fiercely competitive global industry. Hourly labour costs, already at US$33 before this development, will climb yet higher, whilst in China they remain at no more than US$1.1, further improving China’s competitiveness. The assumption is that as these developing countries fulfill their growth potential they see a equal rise in prices, yet according to Giles Calis of Steel Consult International, low wages will remain a competitive advantage for steel producers in developing countries for decades to come.

Two of the world’s main steelmaking countries, China and India, have the additional advantage of holding huge untapped reserves of manpower in their agricultural sectors. As urbanisation in both countries continues, new job seekers from the countryside will provide labour markets with additional supply for many years, which will have a dampening impact on wage inflation. Moreover, mills in low wage countries have an opportunity to enhance their international competitiveness by improving productivity faster than rising costs of employment in developed nations. Looking forward then, it seems the most likely rise in market share in the world steel industry will inevitably come from developed nations, in particular China, as they maintain their competitive edge in labour costs. Sources: the Guardian Online, Reuters Online, Steel Consult International.

Lloyd P.//SMC Editor