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The resurging automotive manufacturer, Ford Motor Company, has made a big splash on the international automotive and commodity industries with their revolutionary light-weight body design. Thanks to Ford securing a hefty amount of aluminum for their flagship product, automakers are scrambling to prepare their supply chains to handle the next big metal demand. This comes at a critical time when the international aluminum market is suffering. Though the metal is in healthy supply, stockpiles are entangled in financial transactions making it hard to get aluminum at all.
For the 2015 year, Ford completely redesigned the SUV’s body to be composed of aluminum as opposed to heavy steel. Ford’s goal was to preserve the historic “Built Tough” standard and prepare for future gas-mileage regulations imposed by the government. The aluminum body is a breakthrough in the industry with benefits such as weight reduction, corrosion resistance and the ease of recyclability; all features that are eco-friendly. The redesign sent jolts throughout the automotive industry as other companies examine designs to incorporate aluminum, and scramble to secure a supply with aluminum producers.
Aluminum is heavily traded on the London Metal Exchange (LME) by major producers and accounts for 80% of global trading in nonferrous metals. These producers create sheets of aluminum and sell them to manufacturing consumers. However, wait times have been at historical highs taking up to 100 days or more to receive. For manufacturers, this is a big concern as global demand continues to rise and will “outpace supply by 37,000 metric tons from a surplus of 312,000 tons”. The LME has tried to implement reforms to shrink wait times, and claim to have increased efficiency at the five most demanded order locations in Vlissingen, Netherlands; Johor, Malaysia; Antwerp, Belgium and U.S. cities of Detroit and New Orleans. However, Detroit and the Netherlands experienced the opposite effect as wait times increased 10-20% for large buyers. In fact, around 45% of global delivery requests held in LME warehouses are still waiting to be delivered. Do you think the aluminum industry will overcome these issues and become the focus of automotive supply chains, or will the surge in demand cause further issues?
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