Operating conditions for companies that use aluminium stagnated at the end of the first quarter of 2022 as output levels contracted and new orders faced their steepest reduction in 22 months on input price inflation, which accelerated to a five-month high.
The seasonally adjusted Global Aluminium Users Purchasing Managers' Index, a composite indicator of operating conditions at manufacturers that are heavy users of aluminium, eased to 50 in March, from 51 in February, according to S&P Global Ratings.
A PMI reading of 50 separates growth from contraction.
“The global aluminium-using industry saw growth momentum stall in March, following a brief respite in February,” said S&P Global economist Usamah Bhatti.
“Output levels fell back into contraction territory amid the steepest decline in total new orders since May 2020. At the same time, new export sales fell at the quickest pace for 21 months.
“Anecdotal evidence suggested that rising prices, notably for energy and fuel, had been exacerbated by the outbreak of war in Ukraine, which also dampened client confidence,” he said.
economist at S&P Global
The Covid-19 pandemic created supply-chain bottlenecks on a global scale, disrupting manufacturing and forcing businesses to modify their supply chains and invest in automation technology.
The war in Ukraine as well as the Covid-19 lockdowns in China are also dampening demand for aluminium.
There was a quicker decline in operating performance among Asia-based companies while European businesses reported their softest output expansion in 16 months, the S&P data showed.
Output in Europe fell for the first time in 21 months, while companies in Asia reported the sharpest contraction since the onset of the pandemic in February 2020.
New business received by aluminium users in Asia also fell at a sharp pace in March and there was a contraction in Europe for the first time since June 2020.
In contrast, companies in the US said operating conditions improved at the quickest pace since last September.
Output growth in the US touched an eight-month high while new business hits its highest level since last August, the report said.
Globally, new export business fell for the sixth time in seven months, and at a “solid pace”, S&P said.
“Widespread reports of rising prices were evident among aluminium users, with firms most concerned about higher energy, fuel and transport prices amid shortages that were driven higher by the war and strict Covid-19 restrictions in China,” Mr Bhatti said.
“As a result, input prices rose at the quickest rate since last October.”
Aluminium users reported a marginal increase in employment in the first quarter of 2022, the quickest gains in five months.
However, there was sustained pressure on capacity as backlogs of work rose for the 21st month running, S&P said.
Purchasing activity also expanded at its weakest pace in 21 months as a decline in new orders, higher prices and supplier delays, due to material shortages, weighed on input buying, the research showed.
The Middle East is home to some of the world’s biggest aluminium producers, including Emirates Global Aluminium, Aluminium Bahrain and Saudi Arabia’s Maa’den, among others.
EGA, which is jointly owned by Abu Dhabi’s strategic investment arm, Mubadala Investment Company, and the Investment Corporation of Dubai, sold about 2.54 million tonnes of cast metal to customers last year.
