Browse By

Industry predictions from metal experts following the reduced demand for aluminium

Following the price of aluminium falling more than 10% since January, experts at the UK’s top metal supplier,
metals4U, have offered their predictions for the industry’s future.

The pricing of mild steel, aluminium, and stainless steel peaked last year in spring following concerns over supply shortage due to the war in Ukraine. But since then, relatively weak demand has led to stockholders
dropping their pricing to reduce excess inventory. This is despite higher production cost on the supply side due to increase in energy cost.

The average cost of materials used in construction work rose by 4.7% in April 2023 due to declining product availability, according to the Building Materials and Components Statistics, however, metals continue to buck this trend,
with the price of steel also falling by 31% between spring 2022 and January 2023.

This isn’t UK-specific, overall global demand for metal is weak, including from China, while a cheap steel import supply surge from Asia into Europe is driving low prices
across the continent.

It’s been a difficult start to the year for the metal industry, and Paul McFadyen, Chairman at metals4U, predicts price deflation and low demand to continue in 2023:

1.
Uncertain global conditions will keep prices low

The UK economy has demonstrated good resilience in the early part of 2023. However, with ongoing general high inflation, high energy costs, interest rates rising, and uncertain global conditions, the outlook
for UK metal demand is set to remain challenging.

“Prices for materials are forecast to fall by 8% in 2023 and a further 3% in 2024. Low prices and demand aren’t ideal for the industry but will create opportunities and savings for tradespeople and their
customers. Moving forward, buyers are recommended to buy more frequently in smaller volume to benefit from further price reductions in market” said
Paul. Buying in smaller volume from alternative suppliers, or cut to specific size requirements, can also deliver cost saving in long term, and is also better for the environment.

2.
High production costs and weak UK demand means price deflation is likely to continue

Mild steel, aluminium, and stainless steel
are commodities with prices strongly influenced by the balance between supply and demand. There has been an ongoing battle over the last 12 months between high production costs on the supply side and weak UK demand.

Paul added: “Weak demand is currently winning, leading to price deflation in the UK metal market. Low demand is likely to continue, forcing businesses to slow down production for the remainder of the year
as they can’t risk being stuck with excess inventory.

3.
Ongoing geopolitical tensions and economic turmoil driving market unpredictability

COVID-19, the war in Ukraine, and earthquakes in Turkey have already caused unprecedented disruptions to supply chains in the metal industry.

“Geopolitical tensions and natural disasters could lead to further
raw materials, transportation bottlenecks, and factory closures. At the same time, the UK economy has so far performed much better than expected and a recovery could drive further demand. We can never predict when these things
are going to happen and moving forward into 2024 companies operating in the metal industry must be agile and adaptable to ever-changing market conditions.”

For more information on metals4U, as well as aluminium, mild and stainless steel and more construction materials, visit metals4U.co.uk