September 9th news; 2021 domestic and international aluminum prices rise can be described as “a ride”. As of Sept. 7, Shanghai aluminum prices hit a new high in 10 years, approaching the highs set in 2006 during the global economic peak. We believe that the rising logic of aluminum prices is mainly in the “supply story”, demand recovery may play a role in the first half of aluminum prices (April 2020 to 2021 quarter), but in the second half of aluminum prices (mainly 2021 quarter to date) may not be the main driver. There are also secondary factors is the global liquidity easing, aluminum’s financial attributes have been strengthened to a certain extent, investment demand also played an important role in the next round of aluminum price rise, the following analysis one by one.
The story of supply
First, overseas aluminum supply recovery is weak. 2020 March, the global epidemic rampant, domestic and foreign aluminum consumption once suffered a heavy setback. However, along with China’s resumption of production and overseas economic pause, aluminum in the case of supply and demand mismatch to stop the rebound, and a sustained rise. Supply and demand mismatch is reflected in: First, the demand recovery growth, domestic real estate investment in monetary and fiscal policy to support the most rapid recovery, and overseas consumption of durable goods climbed to drive China’s exports, indirectly driven by the demand for industrial aluminum profiles. Second, the overseas epidemic led to including the United States, Australia, Russia and other countries electrolytic aluminum output recovery is blocked, so aluminum prices rise in the late mainly supply constraints in the force. Three is the domestic electrolytic aluminum production capacity expansion is constrained. 2021, carbon neutral, carbon peak officially landed, high carbon emissions of aluminum smelting industry is affected: a capacity expansion is blocked, in order to achieve 2030 carbon peak, the central ministries and local governments to implement a “one-size-fits-all” measures, vigorously compress “double high” project capacity; on the other hand, carbon emissions to enhance the cost of carbon emissions of electrolytic aluminum, in anticipation of the increase in the cost of electrolytic aluminum, electrolytic aluminum prices rose. Data show that aluminum smelting in non-ferrous metal smelting and processing in the highest carbon emissions, unit CO2 emissions reached 11818 kg.
Secondly, domestic electrolytic aluminum production capacity is facing the ceiling constraints. Since 2013, the state has introduced various measures to curb the overcapacity of electrolytic aluminum, and by 2017 a consensus of 45 million tons of capacity ceiling was basically formed in the industry. 2013, the State Council issued “Guidance on resolving the contradiction of serious overcapacity”; 2015, the Ministry of Industry and Information Technology issued the “Notice on the Implementation of Capacity Replacement in Some Industries with Serious Overcapacity”; 2017 In 2017, the National Development and Reform Commission and four other ministries and commissions issued the Notice on the Action Plan for Cleaning and Rectifying Illegal and Illegal Projects in the Electrolytic Aluminum Industry; in 2018, the Ministry of Industry and Information Technology issued the Notice on Matters Relating to the Implementation of Capacity Replacement in Electrolytic Aluminum Enterprises through Mergers and Acquisitions, etc. These measures are guiding electrolytic aluminum production capacity from disorderly expansion to steady growth, and the overcapacity situation has been eased.
Finally, in 2021, many provinces and municipalities across the country to restrict power measures and energy consumption double control lead to electrolytic aluminum enterprises is difficult to full production. According to statistics, from January to August 2021, there have been power restrictions in the provincial and urban areas, including Inner Mongolia, Yunnan, Guangxi and Guangdong, while the domestic electrolytic aluminum production capacity is more distributed in Shandong, Xinjiang, Inner Mongolia, three provinces and regions, a combined percentage of 53.71%. However, the new production capacity in 2020-2021 is mainly in Yunnan, Inner Mongolia and Guangxi and other regions, so the power restriction may lead to a reduction of electrolytic aluminum supply by 1.5-2 million tons. 2021 in the first quarter, due to energy consumption double control did not meet the standard was named by the National Development and Reform Commission, thus affecting the production capacity of about 300,000 tons.
Post time: Sep-09-2021