How Global Aluminum Trends Are Impacting the Australian Windows and Doors Market


If you had sat behind the desks of the CEOs of Australia’s leading aluminum window and door companies in March 2021 as the first wave of COVID restrictions rolled across Australia, you would never have predicted the turn of events that the industry would experience over the next 18 months. Like many in the construction industry, manufacturers of aluminum windows and doors anticipated lower demand and construction slowdowns as they contemplated staff reductions and operational shutdowns.

Fast forward 18 months and as an industry we are riding a collective wave of strong construction demand, especially in residential sectors. Local manufacturers are benefiting from the reduced presence of imported aluminum window and door products, which is driving increased demand for locally produced aluminum window and door systems.

Like many suppliers to the construction industry in Australia, the strong growth and high demand in the sector has created a different kind of challenge for local aluminum window and door manufacturers who are now facing security issues. supply due to material shortages and supplier capacity while being subject to unprecedented aluminum. price pressures.

In fact, the ability to supply aluminum products to Australia has never been stretched with price impacts and supply shortages affecting everything from beer cans to automotive parts, not to mention windows and doors. in aluminium.

Capral Aluminum is Australia’s largest producer and distributor of aluminum products. The diversified business supplies to a wide range of industry sectors, including transport and marine, and is also one of Australia’s leading aluminum extruders for the local window and door industry.

Capral CEO Tony Dragicevich said: “Capral has seen a significant change in local aluminum sourcing requirements over the past 18 months, we are seeing an increasing market share versus imported products.

“Of course, the Australian property market is very buoyant thanks to government stimulus measures and our customers who supply this sector are under pressure to meet the strong demand.

Australia is not the only country where the economy has been boosted by government stimulus measures; in addition to supply pressures, there has been a significant increase in global demand and prices for raw materials, including aluminum.

Aluminum pricing can be complicated to understand for those of us who don’t delve into the world of commodity markets; For Australian window and door manufacturers supplying the local construction market, there are 3 main elements impacting the price of aluminum, all of which are at record highs and ultimately impacting the price of windows and doors .

LME

The LME is the market traded price of aluminum on the London Metal Exchange and is used worldwide (outside of China) as the primary cost of aluminum. LME prices are currently at a 10-year high and hit an all-time high of 4.00kg in October 2021, up a massive 50% year-to-date.

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Aluminum extrusion manufacturers, including Capral, extrude aluminum profiles from a billet, being the base material used by extruders for production. Billets are purchased from primary aluminum smelters in Australia and overseas, where smelters add a number of base premiums to the supply of extrusion billets.

Over the past decade, base billet premiums have been stable due to a reasonable balance between supply and demand for billets across the world. The situation has changed dramatically for 2022. Global demand for billets in 2022 has exceeded supply and has resulted in increases of up to 350% in premiums for 2022 foundry supply contracts.

Supply of extrusions

With record levels of local extrusion sourcing and many extruders operating at full capacity, it is likely that Australian window and door manufacturers will see the cost increases in aluminum raw materials experienced by local extruders affect the Supply Chain. This will no doubt also put price pressure on builders and construction crews, as the cost of common construction items such as windows and doors is expected to rise in the coming year.

So what are the predictions for 2022? Industry experts suggest that the cost of aluminum will remain relatively high throughout 2022. Global factors play an important role in understanding this scenario, including the impact of government directives in China and Russia, which are traditionally strong aluminum suppliers to the global market. .

In August this year, Russia imposed a 15% export tax on aluminium. This has further increased regional market premiums and presents an upside risk to prices, if extended through 2022.

As China decarbonizes, increasing reductions in smelting have been taken to meet regional energy consumption and energy intensity targets under China’s five-year emissions reduction plan. Aluminum cuts in China are now ~2.3MT/year with a risk of further cuts in the coming months. Combined with other factors already described, this pushed LME metal prices to multi-year highs

Finally, freight costs and availability continue to put pressure on the local supply of imported billets, with spot container prices increasing by more than 200% in 2021; the container shortage is expected to persist into 2022. Costs for importers to ship to Australia will also increase significantly.

Therefore, from a profitability perspective, aluminum smelters may be able to generate higher margins in alternative markets, such as the EU and US, compared to Australia with strong product and market premiums. To maintain the flow of billets in Australia, product premiums must increase significantly.

“From a local perspective this is really a double edged sword for Australian extruders, we have great demand but costs continue to rise. At Capral Aluminum we are working very hard to ensure that our factories are operating at full capacity and with maximum efficiency so that we can mitigate any unnecessary cost increases for our customers in the window and door industry and meet their expectations for timely supply.We are committed to supporting the window and door manufacturing industry and have worked very hard to establish the additional capacity needed to supply local manufacturers.Throughout 2021 we have made a number of capital improvements and even brought online an additional extrusion press to meet demand,” commented Dragicevich.

“Aluminum window and door products represent the largest segment of the Australian window and door industry; these products are versatile, durable, strong and infinitely recyclable. We are fortunate to have such a strong local industry, developing and supplying locally designed, tested and manufactured products to the market.

“There are a few industries that are not facing unprecedented times in response to COVID 19 and the changes it has brought to our economy. The aluminum window and door industry is no different. I hope the Australian construction industry will continue to support our local builders in the future.

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