Positive.
1, Indonesia’s investment minister said the recent government will ban bauxite exports, April 2022 China imported a total of 11.131 million tons of bauxite, of which Indonesia imported 2.142 million tons, accounting for about 20%. If the news is implemented, the domestic bauxite supply is further tightened, the cost of upside risk.
2, LME inventory continues to depot in nearly 10 years of history low, currently only about 500,000 tons. And the number of written-off warehouse receipts rising, the current write-off / registered inventory warehouse receipts ratio soared to nearly 10 years high, do not rule out the risk of overseas forced position.
3, with the gradual unsealing of Shanghai, the market has strong expectations for the improvement of consumption. Downstream aluminum processing enterprises start to varying degrees of recovery, the second week of May domestic social inventory again into the depot state, the price support.
Negative.
1, the current risk of intensified geopolitical conflicts, Russia and Europe’s contradictions further deteriorated; as the recent Federal Reserve has continued to imply that it will accelerate the process of monetary policy normalization, the market risk appetite has fallen back rapidly. At the same time, the global macro economy has recently seen a significant pullback, the market for stagflation or even recession worries deepened.
2, with the continued rebound in aluminum prices, aluminum smelting profits rose again, the country’s aluminum plants are now in a profitable state. may Gansu, Qinghai and other places still have to resume production and new production capacity into production. With the improvement of domestic logistics, it is expected that the recent market arrivals will increase, and supply pressure began to highlight.
Summary: The macro risk aversion still exists, and the fundamentals have improved. Supply-side pressure still exists, but the high cost support long-term effective, which determines the 2 quarter aluminum price floor is not too low. Consumption is showing obvious resilience, before the complete unsealing of East China, the market will continue to trade consumption turn better expectations. LME inventory continues to de-inventory, as well as the cancellation/registered warehouse receipt ratio, making the potential risk of forced position of LUN aluminum. Short-term operation is recommended to do more on the low.
Operating strategy.
Macro risks still exist, the marginal improvement in fundamentals. The 06 contract is expected to fluctuate between 20500-21500 yuan/ton next week, operationally it is recommended to do more on the low.
I. Market review
Last week, Shanghai aluminum oscillation is strong, the price center of gravity moved up significantly. At the beginning of the week, the electrolytic aluminum social inventory slightly to depot, overlapping with domestic sentiment has improved, aluminum prices rebounded slightly. Midweek part of the profit-taking disc away, aluminum prices have fallen slightly. Thursday electrolytic aluminum social inventory again recorded a decline, while the market rumors of Indonesia banned bauxite export news, aluminum prices rebounded again. As of now Shanghai aluminum 06 contract closed at 20855 yuan / ton, weekly increase of 3.48%.
Second, the price impact factor analysis
1, international macro: the Federal Reserve stance continues to be hawkish, but the boom cycle has been a marginal decline.
The New York Fed manufacturing index unexpectedly contracted in May for the second time in three months, driven by factories reporting lower orders and shipments. Monday’s data showed that the New York Fed manufacturing data fell to -11.6 in May from 24.6 a month earlier, a new low since May 2020 and sharply below market expectations of 17 and below zero indicating a contracting economy.
U.S. homebuilder confidence saw its biggest drop this month since the epidemic just ended as companies faced rising raw material costs and slowing demand. Data released showed that the NAHB housing market index recorded its biggest decline since April 2020, and the index has fallen for five consecutive months.
The final Eurozone reconciled CPI rose 7.4% year-over-year in April and the final core reconciled CPI rose 3.5% year-over-year, with the delayed pass-through of the recent spike in gas and electricity prices set to keep Eurozone inflation above 2% in the first half of 2022.
U.S. initial jobless claims surged to 218,000 in the week of May 14, exceeding market expectations of 200,000 and rising to the highest level in nearly four months since mid-January. Meanwhile, the Philadelphia Fed manufacturing index and the Council’s leading indicators were released, high-frequency data are showing that the U.S. economy downward pressure began to appear.
2, domestic macro: 5-year LPR cut by 15 basis points, the national real estate policy has loosened.
On May 20, 2022, the central bank announced that the 1-year loan market offer rate (LPR) remained unchanged at 3.7%; the LPR for 5-year and above was lowered by 15 basis points to 4.45%.
On May 15, the Central Bank and CBRC adjusted the lower limit of the first mortgage rate to not less than the market quoted rate (LPR) for the corresponding term minus 20 basis points. As of May 18, Tianjin, Zhengzhou, Jinan, Suzhou, Yibin and Wuxi have lowered their first mortgage rates. Hangzhou relaxed the second-hand house purchase policy, settled for less than 5 years can be directly purchased, non-resident of the city paid 12 months of social security can be purchased; Dongguan allows multi-child families, the purchase of an additional set of housing; Chengdu suburbs have purchased housing does not count in the central city when the total number of housing units under the name of the purchase calculation.
The National Committee of the Chinese People’s Political Consultative Conference (CPPCC) held a consultation on the topic of “promoting the sustainable and healthy development of the digital economy”. The meeting proposed to fight the battle of key core technologies, support the sustainable and healthy development of the platform economy and private economy, handle the relationship between the government and the market, support the listing of digital enterprises in the capital market at home and abroad, to open up and promote competition, competition and innovation.
3, inventory situation: electrolytic aluminum inventory weekly to warehouse 38,000 tons
May 22, the domestic electrolytic aluminum social inventory: Shanghai area 57,000 tons, Wuxi area 44.1 tons, Nanhai area 222,000 tons, Hangzhou area 57,000 tons, Gongyi area 85,000 tons, Tianjin 80,000 tons, Chongqing 0.6 million tons, Linyi 17,000 tons, the total of consumption place aluminum ingot inventory 965,000 tons. Electrolytic aluminum inventory this week inventory continues to be in the downward trend, smooth shipments around, traders are still positive about shipping.
4, position situation: position slightly reduced
As of May 20, the Shanghai Futures Institute aluminum total position 409,989 hands, compared with 428,618 last week, a decrease of 18,629 hands, aluminum prices bottomed out last week, the total position decreased slightly to short position reduction.
III. Conclusions and operational recommendations
At present, macro risk aversion still exists, and the fundamentals have improved. Supply-side pressure still exists, but the high cost support is effective in the long term, which determines the 2 quarter aluminum price lower limit will not be too low. Consumption is showing obvious resilience, before the complete unsealing of East China, the market will continue to trade consumption turn better expectations. LME inventory continues to de-inventory, as well as the cancellation/registered warehouse receipt ratio, making the potential risk of forced position of LUN aluminum. Short-term operation is recommended to do more on the low.
Strategy
Macro risks still exist, the marginal improvement in fundamentals. The 06 contract is expected to fluctuate between 20500-21500 yuan/ton next week, and it is recommended to do more on the low side.
Post time: May-24-2022