The global aluminum market has always exhibited the characteristics of both upstream as well as downstream integration. However, the overall production capacity of the leading producers in the global aluminum market has increased significantly in the past few years, which is triggering the other market players to modify their strategies in order to consolidate their position in the market.
Aluminum is largely consumed by the automotive industry, as it has been the most favoured material used in the manufacturing of most of the automotive parts. The industry has favoured aluminum alloys mainly for their low cost and lightweight properties. However, the continual need for more versatile material properties, sustainability, and even lower costs of materials is triggering the end users to discover materials that offer even better performance characteristics.
While plastic is gaining more and more popularity in the automotive industry, recent studies also show that zinc alloys are emerging as a better choice than aluminum or magnesium alloys for automotive manufacturers. Zinc is known to be more sustainable than aluminum and it also shows superior properties alongside traditional factors such as flexibility, cost, and time. Thereby, the rise in adoption of low-cost and high-performing alternatives, especially across the automotive industry is likely to have a negative impact on growth of the aluminum market.
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High Degree of Vertical Integration to Remain a Mega Trend in the Aluminum Market
As a result of the increasing need for improving operational efficiency and attaining a stronger competitive position, vertical integration is emerging as a major trend in the aluminum market. Furthermore, companies that have a complete access to raw materials can also have more benefits of the strategy of vertical integration, and a majority of these companies are integrating their entire value chains to gain complete control over all their supply chain operations. This trend is likely to witness even more popularity in the coming years, as companies are able to offer products at a reduced cost, and as a result, boost their penetration in the global aluminum market.
The Impact of COVID-19 Calamity on Supply-Demand Balance in the Aluminum Market
Since the global outbreak of the novel coronavirus, the prices of aluminum have fallen by nearly 21% between January and April 2020, as the global aluminum market witnessed diminishing demand from the key end-user industries, such as construction and transportation. Furthermore, the demand from smelters also accounted for an increase in inventories, which also weakened the investment activities in the market.
The heavy impact of the COVID-19 pandemic on the key consumer sectors is likely to remain the most significant factor influencing growth prospects of the global aluminum market. End users from the key industrial areas such as construction, transportation, automotive, and consumer goods, are witnessing worker shortage, which may further hamper the aluminum sales worldwide for a significant period of time.
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Aluminum Market: Competitive Landscape
- Aluminum Corp. of China Ltd.
- BHP Billiton Ltd.,
- Vedanta Resources plc
- Norsk Hydro ASA
- United Co.
- RUSAL
- Dubai Aluminum Co. Ltd.
In December 2019, Aluminum Corp of China Ltd, known as Chalco – a leading company in China’s non-ferrous industry – announced that it will be purchasing nearly 10% stakes in Yunnan Aluminium Co – a China-based company principally engaged in manufacture and distribution of alumina, aluminum products – for over 1.29 billion yuan (US$ 183 million). Both the players are currently competing in the alumina and primary aluminum sectors, the move is set to lead the integration of both the entities.
In May 2020, Vedanta Resources Limited – a global diversified metals and mining company with its headquarters in London – announced in May 2019, a proposal to delist the firm from the domestic stock exchanges and buy out minority shareholders of it Indian unit Vedanta Ltd, while taking it private. Between the late 2017 and May 2020, the company stock was known to have lost over 80% from its peak valuations, and the negative commodity cycle may have hit Vedanta, which is anticipated to be the biggest trigger for the delisting.
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