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Aluminum is a popular metal used in industry. This guide explains what aluminum is, what the metal is composed of, and how it’s processed.
We explore the top aluminum producing countries and how such countries contribute as key price drivers of aluminum.
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What Is Aluminium?
Aluminum is the most common element contained in the Earth’s crust, but it is never found naturally in its metallic form. Rather, aluminum is a compound of other elements.
In the early 19th century, Danish-chemist Hans Christian Oersted first extracted tiny amounts of the metal from ore. The complexity of this process led many to believe that aluminum was rarer than gold.
In the late 19th century, however, scientific breakthroughs led to very efficient and cost-effective ways of extracting the metal.
Today, aluminum alloys are abundant and found in a variety of industrial and consumer products.
What Is Aluminium Used For?
Aluminum is lightweight, recyclable, and corrosion-resistant, which makes it ideal for numerous industrial uses.
The following industries represent the largest consumers of the metal:
|Use of Aluminum||Description|
|Aerospace||Aluminum alloys are used in aircraft and rocket construction.|
|Aluminum cans||Manufacturers package sodas and other beverages in aluminum due to the metal’s ability to cool down quickly.|
|Automobiles||Hoods and other lightweight aluminum parts maintain fuel efficiency in cars.|
|Building and Construction||Aluminum is an energy-efficient and sustainable material. The vast majority of aluminum used in construction is from recycled materials.|
|Electrical||Aluminum is an excellent conductor of electricity and is used in electrical wiring.|
|Electronics and Appliances||Appliances including washing machines, refrigerators and laptops use aluminum.|
|Foil and Packaging||Medicine packets, candies and TV dinners are a small sample of the items that use foil packaging.|
|Miscellaneous||Solar panel nanotechnology and aluminum-air batteries are two new technologies that use aluminum.|
How is Aluminum Made?
Aluminum is produced through two methods: primary production and secondary production.
Primary Production Of Aluminium
Aluminum production begins with extracting bauxite, an ore found in the topsoil in many tropical and subtropical regions of the world.
Chemists then produce the chemical compound aluminum oxide, also known as alumina, from bauxite using a method known as the Bayer process.
Every two pounds of bauxite produces one pound of alumina. Through a process known as Hall-Heroult, aluminum producers smelt aluminum oxide and refine it into pure aluminum metal.
Every two pounds of aluminum oxide produces one pound of aluminum.
Secondary Production Of Aluminium
Secondary production of aluminum involves recycling scrap aluminum into new aluminum. The process uses less energy than primary production and is more environmentally friendly.
Producers extract aluminum from waste streams and prepare to recycle it. Aluminum producers sort the scrap by its chemical properties. Scrap with one type of chemical composition has more value than scrap containing several alloys.
After sorting, aluminum refiners place the scrap into melting furnaces and turn it into molten aluminum.
The molten aluminum can be cast into two types of large slabs – ingots and billets. Ingots can be rolled into sheet aluminum, while billets can be extruded into different shapes.
Biggest Aluminium Producing Countries
Global primary aluminum producers smelt about 60 million metric tons annually.
Chinese primary producers account for more than half of the global supply of aluminum.
|Rank||Flag||Country||Thousand Metric Tons|
|#5||United Arab Emirates||2,400|
|#9||United States of America||840|
What Is The Global Demand For Aluminum?
Global demand for aluminum is concentrated in China where urbanization has created strong demand.
China consumes about 40% of the global annual supply of aluminum. Japan, the European Union, and the United States are the next largest consumers of the metal.
What Drives the Price of Aluminum?
Many global industries use aluminum in their products, so the price is a good barometer of the overall health of the world economy.
These are the five most important factors that influence aluminum prices:
- Chinese Demand
- Transportation Demand
- Construction Industry Demand
- Input Costs
- The US dollar
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Chinese Demand For Aluminum
China uses over 40% of the annual global supply of aluminum and, therefore, is the biggest driver of its price. Strong growth in Chinese GDP over the past two decades has pushed many industrial commodity prices higher.
Chinese companies have an increasing demand for aluminum in the packaging sector.
Additionally, real estate, transportation, and electronics sectors have all seen growth in their demand for aluminum.
See how real estate and gold investments compare over time in our article on Real Estate Vs. Gold Investments.
Demand For Transportation Solutions
In the developed world, automobiles and aerospace are one of the most important markets for aluminum. The aluminum industry faces competition from lighter composite materials that seek to replace aluminum as a construction material.
Carbon fiber materials, for example, account for a growing share of the aviation market. As composite materials make technological advances and become more affordable, demand for aluminum may wane.
Construction Industry Demand For Aluminum
The construction and building markets represent the second-largest industrial demand for aluminum. In developing countries, aluminum accounts for about 30% of building materials.
Construction growth rates can be volatile. Interest rates, unemployment, and overall economic strength can affect demand and, in turn, influence the price of aluminum.
Aluminum Production Costs
The costs of producing aluminum can have a meaningful impact on its price. Aluminum production uses large amounts of energy in the smelting process.
Changes in the cost of oil or electricity ultimately feed into the price of aluminum. In the case of recycled aluminum, the cost of scrap metal can also have a direct impact on prices for the finished product.
Aluminum Vs. The US Dollar
The US currency is the world’s reserve currency and as a result, aluminum and other commodities are quoted in US dollars.
Aluminum producers receive fewer dollars for their product when the US currency is strong and more dollars when the currency is weak.
Where Can You Trade Aluminium?
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IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
See our guide on How And Where To Trade Aluminum to find a suitable trading instrument with a regulated broker.
You can also see where aluminum resides on the periodic table as a metal.
To learn about other metals on the global market, see:
- How copper is produced and used
- The processing and price drivers of tin
- How iron ore is mined and processed
The role of precious metals like gold, silver, platinum, and palladium in the world economy.