Chapter 19. Volatility in Aluminum Production

Aluminum smelting is a commodity industry with highly volatile prices, as shown in Figure 19.1. This chapter uses system dynamics to look "inside the industry" to explain part of the volatility.

Figure 19.1. Price of aluminum ingots in cents/pound (1987 dollars).

Aluminum smelting is of special interest to environmental students because of its huge electricity requirement and the potential to reduce electricity consumption through recycling. Aluminum smelting is also of special interest as an example of a commodity production cycle. The chapter begins with an aggregate model of the aluminum industry. It then exploits the power of arrays to develop a model which distinguishes between smelters. It concludes with a discussion of system dynamics and commodity production cycles.