Business for Sale Industry Economics
2002 - 2020
2020 - 2026
The Aluminum Manufacturing industry has experienced considerable uncertainty in the five years leading up to 2020, owing primarily to increases in aluminum prices, which represent global supply and demand.
Although higher costs boost the expense of manufacturing purchased aluminum, operators normally pass on cost increases to consumers, resulting in increased industry sales. Aluminum prices have been especially volatile over the last five years, coinciding with more sluggish demand from major markets.
As a result, revenue has fallen an annualized 3.7 percent to $34.2 billion over the five years to 2020, including a 15.0 percent drop in 2020 alone, as problems related to the COVID-19 (coronavirus) pandemic have triggered major market slowdowns and compounded business results. Furthermore, profit in the sector is projected to slip in 2020.
Companies in the Aluminum Manufacturing sector process aluminum-bearing bauxite into alumina and smelt alumina to manufacture aluminum. Secondary aluminum processing is a less energy-intensive process in which aluminum is recycled from scrap metal.
In addition, the industry involves a diverse range of both vertically integrated and standalone manufacturers that refine unwrought aluminum, usually purchased from upstream manufacturers but also manufactured locally, into intermediate and value-added products such as plate, board, foil, and extrusions for downstream manufacturing and construction markets.
Aluminum is a lightweight, ductile, corrosion-resistant, highly conductive, and infinitely recyclable metal that can be used in a variety of applications.
As a result, aluminum products are used as supplies in structural components for automobiles and aircraft, electrical equipment and parts, packaging materials, nonresidential construction, and a variety of other applications.
Over the next five years, the Aluminum Manufacturing sector will most likely benefit from rising aluminum prices and increased demand from key industrial markets. Import penetration, on the other hand, will almost certainly prove to be a problem for operators.
Nonetheless, expected increases in demand from the automobile and construction industries would undoubtedly continue to boost industry efficiency. Expected changes in product and pricing mix, along with ongoing attempts to reduce manufacturing costs, will also undoubtedly contribute to profit retention over the next five years.
Overall, Research anticipates an annualized 2.5 percent increase in market sales to $38.8 billion over the next five years. However, owing to the impact of the COVID-19 (coronavirus) pandemic, this rise will start from a low base; additionally, research forecasts are focused on existing laws and circumstances, which could begin to change in light of increasing coronavirus case numbers in fall 2020, as well as the outcome of the 2020 US presidential election.
This industry is concerned with refining bauxite, which is a source of aluminum, into alumina, smelting alumina to make aluminum, and manufacturing a variety of aluminum products such as castings, plates, sheets, foils, and extrusions. Aside from enterprises that recycle aluminum from scrap, the market also includes businesses that collect aluminum from the waste stream.
The Aluminum Manufacturing industry is approaching the mature stage of its life cycle. During the ten-year period between 2018 and 2025, industry IVA, or its contribution to the total economy, is anticipated to decrease at an annualized rate of 0.3%.
Projected GDP will expand on an annualized basis at an average of 1.9 percent over the same 10-year period. The forecast of IVA performance is expected to fall short of GDP growth over the duration of the projection, since this sector saw declining demand throughout 2015 and 2016 owing to cyclical demand factors and dramatic dips in global aluminum prices, as well as long-term decreases starting in 2019 and 2020.
Sector consolidation is an indication of the maturity of the industry. Companies as a percentage of the entire industry reduced from their 2000 peak, but their number decreased to its lowest level during the time period from 2010 to 2025. What is of more importance is that revenue per firm is expected to climb, showing that bigger aluminum producers are increasing their operations and market share.
Another contributing factor is that the industry’s goods, technology, and markets are all mature. With regards to changes in products or markets, we see little indication that they will materialize. At the same time, technical progress in the sector is concentrated on driving down prices and increasing the quality of already offered goods and services. The studies found all of these stabilizing elements, which together imply that the industry is likely at the mature phase of its life cycle.
Additionally, a notable development has been increased aluminum penetration within the automotive market as a result of rising aluminum content in lightweight vehicles, due to an increase in vehicle weight. Furthermore, increasing demand for sheet from this market is expected to result in the greatest opportunity for industry growth over the next five years.
The employment of large-scale gear and equipment for operations such as smelting, extruding, rolling, and drawing makes the aluminum manufacturing business capital demanding.
Manufacturers in this business spend $0.19 on machinery, equipment, and other capital expenditure for every dollar spent on salaries. The most capital-intensive processes in the sector are alumina refining and primary aluminum smelting and reprocessing.
Primary smelting and alumina processing are both capital-intensive operations, although secondary aluminum production from scrap and rolling is less so. To meet client standards, compete successfully on price and turnaround time, and reduce operational costs, ongoing capital investment is essential.
Depreciation costs as a percentage of industry sales are now at 1.9 percent, reflecting the fact that most industrial facilities were built decades ago and production equipment is constantly updated or extended.
The revenue and profit are mostly driven by swings in aluminum prices, the Aluminum Manufacturing industry’s performance has been fairly erratic. Because aluminum is a highly commoditized material actively traded in global commodities markets, large year-to-year variations in aluminum prices occur in reaction to variations in worldwide supply and demand for metals.
Production numbers vary from year to year due to changes in aluminum pricing, energy cost patterns, and present and forecast demand levels.
Movements in global demand and the trade-weighted index, which gauges the value of the US dollar compared to its main trading partners, affect the number of exports and imports. Aluminum demand was increased by rising commodity prices, which coincided with the top of the commodities supercycle.
In the midst of the five-year period, however, when producers ramped up aluminum metal output to satisfy global demand, surplus supply combined with a deteriorating global economy resulted in dramatic drops in nonferrous metal prices.
Cyclical demand, along with major primary aluminum smelters’ decisions to idle or reduce production capacity, has resulted in considerable revenue and profit variations during the last five years.
Over the five years leading up to 2020, income has varied significantly, growing as much as 12.2 percent in 2018 and declining as much as 15.0 percent in 2020.