GCC producers of aluminium are anticipating a downward trend in the cost of aluminium after seeing a sharp decline in commodity prices in Q2 of this year.
According to industry experts, the fall in prices has come about due to an increasingly competitive production market, combined with less demand for the metal and a lack of stability in the price of raw materials.
Whilst causing a “price war” among suppliers, a fall in the cost of aluminium is less likely to affect contractors, who are apparently “shielded” by their ability to transfer costs on to the end user.
Naser Al Otaibi of Aluminium Products Company said: “The price of aluminium changes dramatically, we saw a very sharp drop in price in the second quarter of this year.
“There are two main reasons, one is that there is very limited demand for aluminium, and two is that there is no stability in the price of raw materials. This has caused a price war among suppliers, some aluminium companies charging unacceptably low prices that make it very difficult for competing companies.”
Saudi Arabian Mining Company, Ma’aden’s, aluminium project manager agreed.
“The long term trend in pricing is a downward trend, although you’ve got your spikes due to a steady demand for aluminium from China and from Middle East construction.
“After getting back to US$ 2,400 per tonne （AED 8,800） in Q1 of this year, the price has since cooled off again [to US$1,930 per tonne, AED7,090] as China has pulled back."
Speaking about the risks to contractors compared with suppliers, he said: “Contractors are more exposed by whether or not their projects are successful than the cost of raw materials, the end user and supplier are the ones that suffer. Contractors are shielded because they float on top of prices.”
He added that in his view, prices would continue to go down or at least stay level for the next decade.
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