Aluminium, a key component in planes, trains and oven-ready meals, has shot up 43% in price in 2009 and it is set to soar further in 2010 pushing up many fmcg prices.
A vast range of goods from drinks to deodorants are packaged in aluminium. So far, retail prices have remained steady, but further rises in the cost of the metal would force manufacturers to sacrifice margin or hike costs, warned experts. The dilemma would be particularly acute for budget products, where packaging makes up a higher proportion of the cost.
A decline in the number of construction projects and cars produced led to aluminium prices falling in 2008, but they have since recovered and are now rising sharply, according to Mintec commodity analyst Andrew Larkham.
Speculators have exacerbated the problem. One trader bought up 800,000 tonnes earlier this year, almost all of Russia's supply, to push up prices.
Economic recovery, particularly in the developing world, will push demand even higher in 2010.
Aluminium extraction was energy-intensive, said Larkham, with 2% of all world energy used to extract the metal. With oil prices set to rise, this would add to cost pressure.
Recycling would become increasingly attractive, said Diane Caldwell of AluPro, the trade body for recycled packaging.
"If costs and energy prices are rising, then the case for recycled aluminium becomes all the stronger," she said. "Our role is to make sure as much as possible of the aluminium used is processed for recycling."
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Commodity Prices: Packaging prices set to rise as aluminium rockets 43% (12 December 2009)
A vast range of goods from drinks to deodorants are packaged in aluminium. So far, retail prices have remained steady, but further rises in the cost of the metal would force manufacturers to sacrifice margin or hike costs, warned experts. The dilemma would be particularly acute for budget products, where packaging makes up a higher proportion of the cost.
A decline in the number of construction projects and cars produced led to aluminium prices falling in 2008, but they have since recovered and are now rising sharply, according to Mintec commodity analyst Andrew Larkham.
Speculators have exacerbated the problem. One trader bought up 800,000 tonnes earlier this year, almost all of Russia's supply, to push up prices.
Economic recovery, particularly in the developing world, will push demand even higher in 2010.
Aluminium extraction was energy-intensive, said Larkham, with 2% of all world energy used to extract the metal. With oil prices set to rise, this would add to cost pressure.
Recycling would become increasingly attractive, said Diane Caldwell of AluPro, the trade body for recycled packaging.
"If costs and energy prices are rising, then the case for recycled aluminium becomes all the stronger," she said. "Our role is to make sure as much as possible of the aluminium used is processed for recycling."
Read more
Commodity Prices: Packaging prices set to rise as aluminium rockets 43% (12 December 2009)
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