Auto manufacturers will use aluminum to meet fuel efficiency standards, reviving the industry.
Los Angeles, CA (PRWEB) November 28, 2013
The Aluminum Manufacturing industry's financial performance has been highly volatile, largely due to its dependence on market trends for the price of aluminum. While higher prices raise the cost of refining purchased aluminum, cost increases are generally passed on to customers and therefore result in higher revenue for aluminum manufacturers. The price of aluminum dropped 35.3% in 2009 and rose 30.2% in 2010, demonstrating extreme fluctuations during the past five years. “Recessionary conditions were responsible for this volatility in the early part of the period, resulting in dramatically declining demand from the construction and manufacturing sectors, both of which are major markets for aluminum products,” according to IBISWorld Industry Analyst Leah Goddard.
Due to rapidly recovering demand from automakers, industry revenue was able to rebound in 2010 and 2011. However, sluggish growth in the US construction sector and stagnant growth in other developed economies, such as Europe and Japan, have put downward pressure on the price of aluminum. After falling 15.7% in 2012, the price of aluminum is expected to dip again in 2013, causing industry revenue to decrease another 0.7% this year. Overall, deteriorating prices during the past five years have translated into lower revenue for aluminum manufacturers, resulting in an annualized decline of 3.3% to $36.7 billion in 2013.
The drop in demand from key markets, coupled with volatility in the price of aluminum, adversely affected profit margins during the past five years. Lower profit has contributed to the industry becoming increasingly globalized, with a growing number of US companies establishing operations overseas or merging with foreign operators. In addition, the value of industry exports has grown from 16.8% of revenue in 2008 to an estimated 20.0% in 2013. “As other manufacturers of automobiles and parts relocate operations to countries with lower wage and energy costs, exports will continue to be a major source of revenue for aluminum manufacturers,” says Goddard.
Downstream demand from automakers is a major determinant of industry performance. Because aluminum is a lighter alternative to other metals, car manufacturers increasingly use it for vehicle bodies and equipment to meet fuel efficiency standards. As automakers increase production of lightweight vehicles, this growing market will support higher demand and price for aluminum.
For more information, visit IBISWorld’s Aluminum Manufacturing in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
Companies in the Aluminum Manufacturing industry refine aluminum-bearing bauxite into alumina, smelt alumina to produce aluminum and manufacture aluminum products (such as alloys, plate, sheet, foil and extrusions). The industry also includes companies that recover aluminum from scrap.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.