SuperyachtNews.com – Enterprise – Rising aluminium costs defined
How a military coup in Guinea is affecting the European shipbuilding market and the prices of luxury superyachts …
This year the price of aluminum has risen 40 percent, more than any other metal traded in the world, seriously affecting the shipyards in Europe that use the material to build luxury superyachts. With rising raw material costs and higher prices from subcontractors, new construction prices have risen by around 10-20 percent in recent months. Given the abundance of current order books, it is becoming difficult for shipyards to factor possible inflation into their costs given the distance to possible delivery dates. There are several reasons for the rising aluminum prices. One theory is that there was something of a drinking boom during the lockdown, causing the demand for aluminum cans to skyrocket. However, one of the main reasons for the recent sharp rise in prices is the current political unrest in Guinea, West Africa.
In 2015, President Alpha Conde made the country one of the largest bauxite exporters in the world, supplying Chinese refineries with more than half of its bauxite, from which China in turn produced more than half of the world’s aluminum. On September 5, President Alpha Conde was captured by the military junta and Col Mamady Doumbouya replaced him as interim president. The current unrest is concerned as experts believe some countries may impose sanctions or the regime may increase its taxes on mining.
While the data seems like a dire forecast, British shipbuilders Arksen, who all build aluminum yachts, don’t seem too concerned. Ewan Hind, Arksen’s COO, stated: “To date, we have not increased the base price of the third Arksen 85, which is scheduled for delivery in the summer of 2023. However, given the current volatility in the price of aluminum, we may need to reconsider this.” in the future.”
Political unrest in Guinea is not the only factor affecting aluminum prices. Recently, Jamaica’s second largest refinery was closed indefinitely after a fire. And just a few months ago, workers at the Rio Tinto smelter went on strike over contracts in Canada. There have also been some long-term disruptions in China that make the problem worse.
Aluminum production requires a lot of energy, and new energy consumption targets in Inner Mongolia and Xinjiang have reduced production. Gregory Shearer of JPMorgan Chase Bank told The Economist that this, combined with a drought in Yunnan that would cut hydropower supplies, could cut aluminum production by as much as 5 percent.
Steel, another key raw material for shipbuilders, saw its price rise 215% last year, according to Fortune Daily. Despite rising raw material prices, the LME (London Metal Exchange) is forecasting a decline in steel prices. While the current price is around $ 714 per ton, the LME estimates around $ 657 per ton in 15 months. At the same time, SuperyachtNews recently reported on the teak news and how the demand for Superyacht is for the material through proxy funding from a repressive and genocidal military junta in Myanmar.
Most banks and organizations forecast an increase in aluminum prices. Consulting firm Fitch Ratings recently changed the metal’s average price target for 2021 from $ 1,950 to $ 2,200 per ton. Demand is also expected to increase, in part due to the popularity of electric cars, which on average use more aluminum than regular diesel vehicles. The full impact that rising commodity prices will have on the prices of new build superyachts is not yet in sight, but an extreme perspective would suggest that this will deter potential customers from shipbuilding and trigger a boom in second-hand sales. To find out more about commodity prices and how it affects the superyacht industry, follow our page and join the community here.
Use the slider below to see how bauxite mining has affected the landscape in Guinea.
Left – 2011, Right – 2021
Will rising raw material prices affect the luxury shipbuilding market?
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