Local construction industry likely to feel pinch of global aluminium price surge

• Prices of new residential and commercial projects under construction expected to increase in the near future
• Country’s largest aluminium extrusions producer yet to take decision to raise prices 
• Aluminum prices surged to highest level since 2011 this week amid US sanctions on Russia take out big producer 

By Chandeepa Wettasinghe

With aluminium prices in the world market on the surge owing to US sanctions on Russian aluminium giant United Co. Rusal, prices of new residential and commercial projects under construction in Sri Lanka are expected to increase in the near future, an industry stakeholders said.
“This will mainly affect developers who are going to be placing orders for aluminium products. The main items for most of the apartment buildings are aluminium doors, windows and frames because at heights, they need to be able to withstand the weather,” Chamber of Construction Industry Sri Lanka CEO/Secretary General Nissanka Wijeratne said.

Speaking to Mirror Business, he said aluminium products make up between 5 to 8 percent of an apartment’s cost, with the upper limit being reached by some luxury apartments.

“Individual houses still use timber mostly. Especially middle-class housing, but some of the more quality-conscious are now going for aluminium because it doesn’t warp and resists the rain better than timber,” Wijeratne said.

The retail complexes and office spaces being constructed, mainly in Colombo, too would be affected by the prevailing situation.

Despite the increase in prices in the global market, Wijeratne said local aluminium suppliers have not increased their prices so far.
Hayleys PLC subsidiary Alumex PLC, the country’s largest aluminium extrusions producer, is yet to take a decision on rising prices.
“It’s too early to decide,” Alumex Executive Director Pramuk Dediwela said in an e-mail.

Prices of 3-month futures of aluminium on the London Metal Exchange reached a 6-year high of US$ 2,559 per tonne in mid-day trading yesterday after opening at US$ 2,408.50 per tonne. Aluminium prices have experienced upward momentum since the start of April when the price was US$ 1,978 per tonne.

Investment bank Goldman Sachs was quoted in Bloomberg yesterday saying that it was expecting aluminium prices to spike at US$ 3,000 in the short-term.

United Co. Rusal’s owner Oleg Deripaska, along with a number of other Russian business magnates, their companies, state officials and two state-owned companies were hit with US sanctions earlier this month for their links to Russia’s actions in the Ukraine, Crimea and Syria,  attempting to subvert Western democracies and  engaging in ‘malicious cyber activities’.

United Co. Rusal is the world’s second largest aluminium supplier, accounting for around 6 percent of global production, behind a Chinese competitor.