Factors Affecting the Cost of Aerospace Grade Aluminum

Fears of a global recession, the war in Ukraine, bans on imports from Russia, supply-chain slowdowns, labor shortages, jumps in the price of fuel: all these have combined to increase the aluminum costs. The metals’ futures were trading around the $2,300-per-ton mark in mid-September, down by 40 percent from the $4,062-per-ton reached in March.

That drop should come as a welcome relief. Instead, a number of factors—including those mentioned above—have combined, as if in a perfect storm, to keep costs high. Those in the aerospace and defense industry shouldn’t expect to see the costs of aerospace-grade metal extrusions or metal alloys decrease.

Alloy Prices Going Up

The cost of elements such as copper chromium, titanium, and magnesium used in metal alloys has affected their pricing. Costs for these alloys hover in the $9 to $11 per pound range because of the processes, chemicals, and testing involved in creating these alloys.

And the magnesium shortage continues. Magnesium plays a vital role in some of New Source Corporation’s products, as it’s used to harden aluminum alloys. Last fall, Alcoa Corp., expressed worries about magnesium scarcity, with some suppliers even suspending deliveries by calling up force majeure clauses, which allow them to cut supplies due to circumstances beyond their control.

In fact, magnesium prices hit a decade high in 2021: more than $10,000 per ton. That dubious record is the result of rising coal costs in China, the country that produces about 90 percent of the world’s magnesium. The shortage caused concerns at aluminum smelters and diecasters, according to Bloomberg. European metal plants say they need government support to survive.

Prices for the mineral have dropped since that time, mostly due to improved availability of material in European ports, though the magnesium market is expected to remain volatile.

Aluminum Availability Languishes

Even as aluminum costs decline, issues with availability and lead time add to the expense. Due to the unavailability of raw metal, lead times have ballooned from 25 weeks to 48 weeks.

Aluminum was already facing availability issues when the war in Ukraine broke out in February. While New Source Corporation has never used aluminum billets from a Russian supplier, the trade sanctions mean that other industries, like medical and automotive, that were using Russian metal must look for other suppliers.

As a result, the industry is now drawing from domestic metal, which was already in short supply. The United States can’t keep up with metal production, which leads to long waits for the products.

Other issues compound the already-existing supply problems. In July, Federal regulators cleared the way for Boeing to restart deliveries of its 787 Dreamliner, which were paused more than a year ago because of quality concerns. It also anticipates the need for 1,000 737 Max and Dreamliners in the African market by 2040. Boeing needs metal for those planes, which will further compound supply issues.

With aluminum capacity going down and demand increasing, it could have been difficult for New Source Corporation to meet customer needs. But we continued to grow our close partnerships with manufacturers so we could know exactly where to source these materials.

Plan More More Than One Year Out

New Source Corporation recognizes aluminum and alloy shortages will affect customers.

“We’ve been telling everyone to try to plan 16 months in advance. It’s hard to do, but still possible with the right distribution partner,” said Jamie Barron, Vice President of New Source Corporation.

Some of our customers have already placed their orders for 2024. New Source Corporation ships monthly, quarterly, or as needed on a Just-In-Time basis to fit your needs.

“We do the scheduling for you, taking the pressure off your internal planning; thereby allowing New Source Corporations to be proactive in the everchanging market lead times,” Barron said.

Should your company be looking more than one year down the road?

“There really is no end in sight for when these lead times will stabilize,” Barron said. We’re still getting price increase announcements for not only aluminum but nickel alloy.

“Until someone else can innovate and find new ways to increase the aerospace metal supply, this is where we are,” Barron said.

New Source Corporation works with customers on scheduling and Just-In-Time supply. Working with a parts supplier like New Source Corporation ensures you will not be caught without your aerospace-grade aluminum and alloy parts in these uncertain pricing and supply times. Contact us today to learn how.

November 3, 2022

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