Soaring 90% in a Year, the Aluminum "Black Hole" Shocks the U.S. Auto Industry, with Ford Motor as the Biggest Victim!

The U.S. auto industry is facing a supply crisis triggered by soaring aluminum prices. A combination of factors is eroding automakers' profits, squeezing dealer inventories, and threatening the peak sales season this summer.

According to a report by The Wall Street Journal on Sunday local time, sources revealed that Ford Motor has applied to the Trump administration for an exemption from the 50% tariff on imported aluminum but has not yet received a response. Meanwhile, Ford has raised its commodity cost expectation for the year from $1 billion to $2 billion, primarily due to the continuous rise in aluminum prices. RJ Scaringe, CEO of electric vehicle manufacturer Rivian Automotive, also stated in last week's earnings conference call, "Metal costs, especially aluminum costs, have become a key concern for us."

The sharp rise in aluminum prices stems from multiple simultaneous shocks: the US-Iran war has blocked aluminum exports from the Persian Gulf region, which accounts for about one-fifth of U.S. aluminum consumption; the U.S. government has imposed a 50% tariff on imported aluminum; and multiple fires at factories of Ford's major aluminum suppliers last autumn led to production interruptions. According to S&P Global Energy data, the current price of primary aluminum in the United States is approximately $6,100 per metric ton, compared to just $3,220 a year ago, representing an increase of nearly 90%.

The aluminum market is experiencing its largest supply gap in over twenty-five years. As mentioned in a previous article by Wallstreetcn, JPMorgan Chase warned that the global aluminum market has entered what it calls a supply "black hole." Even if the Middle East conflict were to end immediately, it would not stop this deep and persistent supply shortage, predicting that aluminum prices could exceed $4,000 per ton.

Ford Motor Bears the Brunt, F-150 Inventory in Short Supply

Ford Motor is the most severely impacted in this aluminum crisis.

In 2014, Ford changed the body material of its best-selling U.S. model, the F-150, from steel to aluminum, making Ford the largest buyer of aluminum in the auto industry. Ten years later, this strategic decision is becoming a heavy burden.

Novelis, Ford's major aluminum supplier headquartered in Atlanta, experienced multiple fires at its factory in Oswego, New York, last autumn, leading to a production halt that directly reduced Ford's adjusted profit by $2 billion last year.

According to Motor Intelligence data, Ford's sales of F-Series trucks in the first quarter of this year were approximately 160,000 units, lower than the 190,000 units in the same period last year. Ford stated that it plans to produce an additional 150,000 trucks this year on top of the already compressed production volume in 2025 to make up for the supply gap.

Kumar Galhotra, Ford's Chief Operating Officer, told industry analysts last week, "If any disruptions occur, we have contingency plans and additional aluminum supplies ready to ensure that factory production schedules are not disrupted." Ford stated that the aluminum rolling production line at the Oswego factory is expected to restart this month, but Novelis had previously set the target for the end of June. Even if production resumes, it will be gradual, making it difficult to quickly replenish inventories in the short term.

Dealer Inventories Under Pressure, Concerns Loom for Summer Peak Season

The impact of the aluminum shortage has spread to terminal sales. Sam Pack, a Ford dealer in Texas with four stores in the Dallas-Fort Worth area, stated that the F-150 and Super Duty trucks are the "cornerstone" of his business. Currently, his F-150 inventory is sufficient for only about 42 days, below the usual level of 60 days.

"We hope to have more inventory," Pack said. He expressed concern about whether he could stock enough goods to cope with the busy summer sales peak season, stating, "The next 90 days will be the truly critical period."

The report stated that Ford recently applied to the Trump administration for an exemption from the 50% tariff on imported aluminum until the Oswego factory resumes full-capacity production, but government officials have not yet made any concessions.

The North American auto industry consumed a total of 3.7 million metric tons of aluminum last year, an increase of nearly 30% compared to 2020. According to data from metal market consulting firm CRU, aluminum has become a key material for automakers to improve fuel economy and overall vehicle efficiency. However, the 50% tariff means that regardless of the source of the aluminum, automakers and other buyers must bear this additional cost burden.

Return to Steel? Significant Disagreement in the Industry

High aluminum prices have sparked discussions in the market about whether automakers will switch back to using steel.

Lourenco Goncalves, CEO of Cleveland-Cliffs, the largest supplier of automotive steel in the United States, stated in April, "I have never seen such a strong momentum for replacing steel with aluminum."

However, many industry insiders are skeptical about a large-scale return to steel. Mark Millett, CEO of Steel Dynamics, stated, "I don't think this will happen." He pointed out that retrofitting production equipment for aluminum components to steel components is costly and time-consuming. Steel Dynamics also supplies aluminum to the auto industry.

Sam Fiorani, Vice President of consulting firm AutoForecast Solutions, shares the same view, especially regarding Ford Motor: "Their entire vehicle is designed around aluminum, and changing the body structure will be very difficult." He also pointed out, "Ford Motor's exposure to aluminum costs far exceeds that of any other automaker."