Aluminum prices reach a 10-year high, palladium had its worst month in 10 years, and both are related to failing supply lines. The E&MJ Prices Index this month reports aluminum prices at $2,916 per metric ton (mt) or $1.33/lb, a 9.3% month-to-month increase of $249/mt ($0.12/lb). The September gain puts aluminum prices roughly 80% higher than the April 2020 low point of $1,610.20/mt ($0.73/lb).
Energy drink makers and microbreweries have been crying the blues about the increase in metal prices as well as the increased cost of ingredients. The problem isn’t a shortage of metal, but a shortage of metal in North America. Like most consumables these days, aluminum ingots are sitting in warehouses in Asia with no hope of reaching North America anytime soon. Last year, China, for the first time since 2009, became a net importer of aluminum.

Inflationary pressure is expected to continue. Rusal, the world’s largest aluminum producer, now faces a tax on aluminum exports, which was initiated last month. They will most likely pass that along to customers. Rusal’s bauxite supply in Guinea may be in jeopardy with the recent coup, although the militants are reassuring the Russians they will keep the supply routes open. On a macro scale, aluminum smelters consume massive amounts of energy and energy costs continue to climb worldwide.

Market logistics have caused the opposite problem for palladium. A slowdown in automobile production has reduced palladium demand. If carmakers can’t get microchips, they have no need for catalytic converters. Palladium prices fell $600/oz to $1,900/oz from $2,500/oz during September — the platinum group metal’s worst monthly decline since September 2011. Automobile manufacturers are saying the chip shortage could extend the production slowdown for the near term.

All is not lost, however. Demand for new autos is high and automakers will eventually fill those mounting orders, which will likely drive palladium prices higher. Earlier this year, an expectation of an economic recovery pushed palladium to nearly $3,000/oz and that could happen again.