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Friday, May 25, 2007

Continually rising costs bring higher prices

The rising cost of aluminum is driving suppliers to implement price increases to shore up shrinking margins.

Suppliers of aluminum extrusion profiles in mainland China and Taiwan are warning of more price increases in coming months unless material costs drop, or at least stabilize, soon.

Prices have already risen by as much as 20 percent in both the mainland and Taiwan after the cost of aluminum alloy soared to about $2,500 per ton. Suppliers in the mainland said this is the highest that costs have been in 17 years.

Material costs have been inflating incessantly for the past two years primarily because of a shortage in supply. Several small suppliers of the material in the mainland have been forced to stop operations because of environment-protection regulations. This is a crucial development that is forecast to impact heavily on the aluminum alloy supply for the next three to five years.

The plans of some large aluminum alloy producers in the US and Europe to close certain processing plants is compounding this problem, threatening to cut supply and drive costs up further.

Mainland makers of aluminum extrusion profiles source about 80 percent of their material requirement from the provinces of Guangxi, Qinghai and Henan, purchasing the rest from the US, Russia and Australia.

Most makers in Taiwan source aluminum ingots from local suppliers. The ingots are usually imported from Australia, then reprocessed in Dubai, Bahrain and South Africa. Only a few makers in Taiwan, however, have the capability to import the ingots directly.