Global aluminium users register strong improvement in operating conditions in May

New orders and production grew as global economy recovers from the coronavirus pandemic

Emirates Global Aluminium sold 2.52 million tonnes of cast metal last year. The Middle East is home to some of the world’s biggest aluminium producers. Courtesy Mubadala Investment Company

Companies that use aluminium across the world registered a strong improvement in operating conditions in May.

Both production and new orders grew as the global economy began to emerge from the coronavirus pandemic-induced headwinds.

The seasonally adjusted Global Aluminium Users Purchasing Managers Index, a composite indicator designed to give an overview of operating conditions for manufacturers identified as heavy users of aluminium, increased slightly to 55.9 in May, from 55.7 in April.

“A sustained expansion in production levels kept the latest PMI reading above the neutral 50 threshold,” IHS Markit’s economist Usamah Bhatti said. “New orders also continued to grow, partly due to the fastest rise in export sales since March 2010.”

Aluminium users across all three monitored regions registered output expansion in May, led by a record rise in demand at European companies. Firms in the US also noted a quicker expansion in output levels, while Asia-based companies pointed to a softer, but still sharp, upturn in production.

However, concerns related to raw material shortages “continued to weigh on aluminium users, as a record deterioration in vendor performance led to a rapid rise in average cost burdens that was the fastest recorded in over ten years”, Mr Bhatti said.

A commodity boom has increased the prices of products such as steel, copper and aluminium, among others, to record highs and has further pressured manufacturers across the world.

The global economy is set to grow by 6 per cent this year after contracting 3.3 per cent last year as countries ease restrictions to boost trade and business activity.

However, the resurgence of cases and tighter restrictions, notably in parts of Asia where a large amount of processing occurs, as well as persistent supply chain disruption, may dampen growth in the near-term, Mr Bhatti added.

Aluminium users also reported severe supply chain disruptions during May, which led to higher input costs.

Higher costs did not deter hiring activity in the sector. As operating conditions improved, global aluminium users increased their staff for the fourth month in a row in May, according to the survey. Exports grew at the fastest rate in over 11 years due to higher external demand.

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 2.52 million tonnes of cast metal last year.