Group items tagged

In this article the company Norsk Hydro decided to change the raw material they produce for German rolling mills to 'increase in-house primary metal sourcing, replacing less cost-efficient remelting of cold metal as a source for its Neuss-Grevenbroich rolling mills.' This is supposed to optimize to the current issue in the market. The Neuss mill will increase production of aluminium to 150,000 tonnes per year unlike the last few year in which it only produced 50,000 tonnes. The factories have a maximum production limit of 230,000 tonnes. Although the tonnes created per year are now increased, it is still not exploiting the maximum point. This point may not be profitable due to limited demand in the market. Maybe the supply and new improvements including framework, CO2 compensation and more efficient smelters will increase the demand.

Although this article shifts supply to the right as there are technological advancements such as better smelters, there is also a movement along the supply curve as the company is getting closer to exploiting their maximum production point. In this case they state that supply is higher than demand. At the moment they have a surplus so the producer must decrease the price so that the quantity demanded will increase. The product, because of the surplus, is less valuable and as there is more quantity it is not as scarce as before. Related markets can buy the aluminum at lower price, increasing their benefit. The producer of aluminum must reduce resources allocated into production to return to the equilibrium point.