In February 2022, the Russian military invaded Ukraine, escalating the Russo-Ukrainian War that has been ongoing since 2014. The ripples of this conflict have been felt worldwide, and the political consequences have significantly impacted the global economy.
The global economy has seen a rise in costs in industries such as the automobile industry, consumer goods production, and the food and energy industries. Many of these industries have a common denominator that could be a contributing factor to the rise in costs: aluminum.
Aluminum is a growing industry with huge demand. It is used in everything from automobile production to packaging in items such as cans, as well as in the manufacture of construction materials. One industry many would not consider would be affected by the rise in aluminum costs is the printing industry.
Aluminum is used to manufacture printing plates used in lithography, also known as offset printing. This method uses an aluminum plate to transfer an image to a rubber roller, creating an image on the print material. Due to an increase in the cost of aluminum, the printing industry is seeing a rise in production costs.
So how does the war in Ukraine cause an increase in price in the aluminum industry? According to an article Mohammad Sayed wrote for Infomineo, there are a few factors that have impacted the rise in the cost of aluminum after Russia invaded Ukraine.
“Firstly, and most importantly, oil price spikes had a detrimental effect not only on aluminum but on all commodities. The Brent oil price was marked at around $80 per barrel at the beginning of 2022, but the price jumped from around $96 per barrel on February 14th, 2022, to around $123 per barrel on March 7th, 2022. More than four months after the start of military operations, the Brent price remains around $120 [as of June 2022],” explained Sayed. “Secondly, supply chain disruptions due to the Russian invasion increased the cost of shipping operations. The ClarkSea Index (all shipping markets) shows a dramatic increase in the shipping rate from around $30,000 per 40-foot container by the end of January 2022 to over $40,000 in March,” Sayed continued.
Sayed goes on to say that global political changes also contribute to the rise in aluminum prices. As many European aluminum manufacturers ceased or decreased production with the onset of the war, China has seized the opportunity to take advantage of this shortage.
“Since China has not imposed sanctions on Russia, the country has had access to cheaper energy and lower production costs compared to Europe. This created a profit opportunity when a trader buys Asian aluminum and resells it in Europe or the United States,” said Sayed.
According to Harbor Aluminum, Russia is the third largest manufacturer of aluminum. After Russia invaded Ukraine, several nations cut off imports to Russia of raw materials used to produce aluminum, such as bauxite and alumina. This has also contributed to an increase in price.
When it comes to the trade of international metals, the London Metal Exchange (LME) is regarded as the forerunner. According to their website, the majority of non-ferrous metals traded worldwide go through their platform. In many ways, the LME is the price setter of traded metals.
“When trying to understand the effect of the price of aluminum on the newspaper industry, one must be careful not to rely solely on the movement of aluminum in the LME (London Metal Exchange). Lithograde aluminum, the aluminum used in the manufacture of printing plates, is a specialty grade aluminum, and with demand for lithograde continuing to drop worldwide, there are fewer players in this marketplace. They pretty much set the price you will pay without a lot of negotiating room. There is a growing demand for aluminum from both the automotive and can industries, so the competition for the raw material is coming from sources the industry has not seen in the past,” said Ted McGrew, VP of the Newspaper Segment, Kodak.
At the onset of Russia’s invasion of Ukraine, the LME saw itself caught up in the uncertainty when the fates of many metal imports became a source of contention. However, according to a Reuters article by Deep Kaushik Vakil and Pratima Desai, LME claimed that they would continue trading and storing Russian metals in their system due to their high concentration in the market.
“One must also consider that there are no lithograde manufacturing lines in the United States; all of our metal is imported. Taking the raw material and turning it into a printing plate, a process called smelting, requires tremendous amounts of electricity and the price of printing plates are certainly being affected by energy surcharges being added to the cost of a plate, given the fact that cost-effective electricity has come from Eastern Europe in the past,” McGrew said.
McGrew identifies that many variables come into play when considering the effects of shortages of aluminum and its raw materials on the newspaper industry. The Russo-Ukrainian conflict is not expected to de-escalate in 2023, and the rise in prices for raw materials and other production costs will continue to be affected.
According to another article by Reuters, Australia put a 2022 ban on exports of alumina and bauxite to Russia. With Rusal, Russia’s largest aluminum manufacturing company, experiencing a shortage of raw materials, Reuters reported a 33% increase in early 2022 production costs.
“The ban on alumina exports to Russia imposed by the Australian government, as well as the suspension of production at the Nikolaiev [Mykolaiv] Alumina Refinery due to the events in Ukraine, negatively affected the supply of raw materials for aluminum production and led to an increase in costs,” Reuters reported in a statement from Rusal.
These rises in costs are causing an increase in prices for the newspaper industry, thus affecting the bottom line. Consumers are also feeling the implications of these price increases as many industries raise sales prices to offset production costs. The publishing industry must be innovative to find ways to keep consumers invested in print.
PAGE Cooperative is a purchasing cooperative that works with privately-owned newspapers to provide products and services at a discounted rate. Throughout this conflict, PAGE Co-op has done what it can to keep costs down for its members.
“Unforeseen circumstances can arise, as we witnessed last year with another key commodity, namely newsprint, due to myriad issues, including shortages of supplies and deliveries. In many cases, PAGE interceded to locate supplies, even borrowing within member papers to assist other PAGE members. In the spirit of a true cooperative, PAGE members help each other,” said PAGE Cooperative in a statement to its members.
Kirsten Staples is a contributing writer for Editor & Publisher. She can be reached at firstname.lastname@example.org.
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