What are the impacts of the Bank of America’s downward revision of copper and aluminum price forecasts on the businesses of aluminum sheets, aluminum bars, aluminum tubes, and machining?

On April 7, 2025, the Bank of America warned that due to the continued trade tensions, the volatility in the metal market has intensified, and it has lowered its price forecasts for copper and aluminum in 2025. It also pointed out the uncertainties in the US tariffs and the global policy responses. The strategists of the Bank of America wrote in a report that as the rules change, volatility takes the dominant position. As the actions of tariffs and trade policies and the reactions to these actions come into play, the volatility will increase. The bank has lowered its 2025 copper price forecast by 6% to $8,867 per ton ($4.02 per pound), and has also lowered the aluminum price forecast, citing the demand risks brought about by the slowdown in global economic growth and the potential strengthening of the US dollar.

I. Impacts on the businesses of aluminum sheets, aluminum bars, and aluminum tubes

1. Challenges of cost fluctuations

The fluctuations in aluminum prices directly affect the procurement cost of raw materials. If the aluminum price drops sharply in a short period, the value of the company’s inventory will shrink; if it rises rapidly, the procurement cost will increase, squeezing the profit margin. When the aluminum price is falling, if the company holds a large amount of high-priced inventory, it may face inventory write-down losses; when the price rises, the increased procurement funds will affect the liquidity of funds and cost control.

2. Changes in market demand

The slowdown in economic growth restrains the demand for aluminum sheets, aluminum bars, and aluminum tubes from downstream industries. For example, if the construction industry contracts, the demand for aluminum sheets and aluminum bars used in construction will decrease; if the production volume of the automobile manufacturing industry drops, the demand for aluminum tubes used in the production of automobile parts will also decline.

II. Impacts on the machining business

1. Unstable order volume

The machining business depends on the demand from downstream industries. The fluctuations in copper and aluminum prices affect downstream industries. For instance, electronic and machinery manufacturing enterprises may reduce their production scale due to cost and market uncertainties, and the order volume of machining may decrease accordingly.

2. Dilemmas of processing cost and pricing

The processing cost of machining is closely related to the price of raw materials. With the frequent fluctuations in aluminum prices, it becomes difficult to set a reasonable price.

III. Countermeasures

1. Optimize procurement management

Establish long-term and stable cooperation with suppliers and strive for favorable terms such as price locking and priority supply. Use financial instruments such as futures and options for hedging to lock in the procurement price and reduce the risk of price fluctuations.

2. Expand the market and customer base

Actively explore emerging markets to reduce the dependence on a single market. Pay attention to the opportunities brought by the Belt and Road Initiative, participate in infrastructure construction projects in countries along the routes, and expand product sales. Strengthen cooperation with new customers, develop high-value-added products, and enhance market competitiveness and risk resistance capabilities.

3. Improve internal management efficiency

Strengthen cost control, optimize the production process, and reduce production energy consumption and losses. Improve production efficiency, shorten the production cycle, and reduce operating costs. Establish an early warning mechanism for market price fluctuations and adjust business strategies in a timely manner to cope with market uncertainties.