Primary aluminum production in the US remains low

Despite slow price increases, primary aluminum production in the United States has fallen by more than 50% since January 2015. The United States consistently produced about 140,000 tons of aluminum each month until mid-2015, when production slowed significantly. Since April 2016, primary aluminum production has averaged around 60,000 tonnes per month, even when aluminum prices have slowly increased.

Primary aluminum production is more price sensitive than secondary aluminum production (i.e. recycling). Several factors contributed to the recent contraction in primary aluminum production in the domestic market, including rising electricity prices, higher labor costs and the strength of the US dollar. Primary aluminum production is extremely energy intensive as it uses electricity in the smelting process.

Factories cut production rather than completely shutting down. The decline in primary aluminum production in the US is unlikely to change in the near future. The production cuts allow manufacturers to temporarily cut operating costs in the hope of improving market conditions. The high number of domestic plant layoffs over the past five years likely indicates that aluminum companies do not believe the market will return to favorable conditions soon.