Core view
Aluminum is one of the major industrial metal varieties, and the scale of aluminum production and sales in China is high. Aluminum metal physical and chemical properties are superior, commonly used in construction, transportation and other fields, is currently one of the world’s major industrial metal varieties. China’s electrolytic aluminum industry production and sales scale is high, in 2021 China’s electrolytic aluminum effective production capacity of 44.859 million tons, the global share of about 58.3%, apparent consumption of 39.879 million tons, accounting for about 60.0% of the total global consumption.
Domestic supply-side reform continues to promote, the aluminum industry has a capacity ceiling. In recent years, China’s electrolytic aluminum industry policy control gradually tightened, according to Fitch Ratings estimates, China’s electrolytic aluminum industry or will touch about 45 million tons of capacity ceiling. With the current electrolytic aluminum production capacity gradually approaching its ceiling, the domestic new production capacity projects significantly decline. 2020 domestic electrolytic aluminum production capacity of 1.97 million tons, and 2021 only added 175,000 tons. Under the influence of the policy, the future approval of new projects or more difficult, the industry supply-side growth is limited.
European electricity price surge combined with geopolitical conflicts, global electrolytic aluminum supply is limited. From the viewpoint of capacity distribution, the global share of electrolytic aluminum production capacity in Europe in 2020 is 11.5%, and the share of electrolytic aluminum production in Russia in 2021 is 5.2%, and the recent impact of carbon neutral and geopolitical conflicts, Europe and Russia electrolytic aluminum supply is generally limited. On the one hand, European electricity prices continue to rise to drive the relevant enterprises to reduce production, the monthly average price of electricity in Germany in February 2022 reached 128.78 euros/MWh, an increase of 164.4% year-on-year. On the other hand, Russia is subject to sanctions affecting electrolytic aluminum exports. At present, the major Western economies have respectively begun to Russia’s sanctions action, such as the exclusion of some Russian banks from the SWIFT system, electrolytic aluminum supply from Russia or will be affected to some extent.
Domestic aluminum consumption is expected to continue to grow, driving the supply-demand gap to further expand. From the domestic electrolytic aluminum consumption distribution, in 2021, China’s electrolytic aluminum is mainly used in construction and transportation, electricity three major areas, consumption accounted for 27%, 24% and 13% respectively. In construction real estate, the domestic housing new construction area increased by 28.8% during 2015 to 2019, while the completion end of 2020 was affected by the epidemic has declined, so it is expected that the domestic real estate completion area will still maintain a high growth rate in the next 1-2 years. Transportation, in 2020, the pure electric vehicle single vehicle aluminum volume is about 291.7Kg, higher than the non-pure electric vehicle 205.9Kg. With the gradual increase of new energy vehicle penetration, the transportation sector aluminum demand is expected to continue to improve. In terms of electric power, the national grid in 2022 will invest 501.2 billion yuan, with a year-on-year growth rate of 8.25% and a record high investment. Along with the downstream boom, electrolytic aluminum supply and demand gap in 2022 or up to 3.246 million tons, the supply and demand gap is continuing to expand trend.
Prices continue to climb, aluminum enterprise profit level is at a high level. First, since 2020, domestic and global aluminum prices have moved up sharply, as of May 13, 2022, LME aluminum prices closed at $2723.0 / ton, an increase of about 12.4% year-on-year. While the domestic aluminum industry has relatively excess raw material capacity, the overall aluminum industry chain has relatively excess upstream capacity, and electrolytic aluminum enterprises have strong cost control capabilities. As of May 13, 2022, the domestic electrolytic aluminum – alumina spread of about 14,306.14 yuan / ton, compared with the same period in 2020 increased by 167.7%, electrolytic aluminum industry profit situation is at a historically high level.
Post time: May-27-2022