In the first week of the Year , Shanghai Aluminum ushered in a “good start” and recorded a sharp rise for four consecutive days. The Shanghai Aluminum 03 contract price once exceeded 23,400 yuan / ton. At present, there has been a slight correction in the high aluminum price. On the one hand, overseas inflation has continued to rise, and market transactions are expected to raise interest rates in advance. The dollar index rebounded, and the non-ferrous plates were collectively suppressed. On the other hand, the resumption of work and production in the domestic downstream has not yet fully recovered, and the high aluminum price has suppressed the limited willingness to purchase downstream. At the same time, the epidemic situation in Guangxi has begun to ease, and the supply pressure has increased. At present, the negative factors continue to materialize, but aluminum prices have not fallen significantly. On the contrary, affected by the renewed tension in the Ukraine-Russia region, it maintained a strong trend. The probability of strong short-term aluminum price shocks is high. If Rusal is sanctioned again, the price will have further upward momentum.
01 Supply pressure has eased
Affected by the epidemic in the early stage, the Baise area of Guangxi implemented city-wide traffic control, resulting in the inability of local alumina and electrolytic aluminum to be shipped out in time. According to statistics, the built-up production capacity of electrolytic aluminum in Guangxi Province is about 2.94 million tons, of which the built-up production capacity of electrolytic aluminum in Baise, Guangxi reaches 2.44 million tons, accounting for 83% of the total production capacity. As of the end of January, the operating capacity of electrolytic aluminum in Guangxi was about 1.98 million tons, of which the operating capacity of electrolytic aluminum in Baise was 1.73 million tons. At present, the production has been reduced by about 420,000 tons due to the epidemic. The built alumina production capacity is 11.9 million tons/year, accounting for 13.5% of the total domestic production capacity. Among them, the alumina enterprises in Baise have a total production capacity of 8.9 million tons, accounting for 75% of the total production capacity in Guangxi Province. At present, the production has been reduced by about 2.2 million tons due to the epidemic.
Most of Guangxi’s electrolytic aluminum is mainly for export and self-use of aluminum water, and the export products are mainly sent to the provincial and southern China markets. During the epidemic, poor traffic will lead to a significant increase in the amount of ingots in the province. At the same time, the spot supply in South China is slightly tight, and the spot premiums and discounts are significantly higher than in previous years. At present, the local epidemic situation is gradually improving, and aluminum ingots are beginning to flow. At the same time, the arrival of goods in South China has improved, and the current premium and discount have fallen, but it is still at a relatively high level in the past five years.
The alumina supply in South China is also in a tight situation, superimposed on the large-scale production reduction of alumina in Jinluyu and Henan due to the impact of environmental protection, the overall domestic alumina supply is in a tight state, which drives the alumina price to continue to rise. The current domestic average price is 3300 yuan. About / ton, the cost of electrolytic aluminum keeps rising slowly.
02 The epidemic disturbance continues to weaken
Last week, the Baise Epidemic Prevention and Control Headquarters lifted the “no entry and exit” control measures with Baise outside the city. High-speed rail, high-speed, and aviation resumed normal traffic, highway and waterway passenger transportation resumed normal operation, and the city gradually lifted community control and control at different levels.
Six counties, including Tiandong County, Napo County, Lingyun County, Leye County, Tianlin County, and Xilin County, have lifted the control and control of the whole region and turned to normalized prevention and control. Local electrolytic aluminum and alumina production enterprises will resume work and production one after another. The transportation of raw materials and the transportation of electrolytic aluminum and alumina will also gradually resume. This area involves an electrolytic aluminum production capacity of 300,000 tons and an alumina production capacity of 1 million tons, basically returning to normal;
In 4 counties (cities, districts) including Youjiang District, Tianyang District, Longlin Autonomous County, and Pingguo City, except for the closed control area, control area, and prevention area, other areas have been released from control and turned into normalized prevention and control. This area involves a production capacity of 1.475 million tons of electrolytic aluminum and a production capacity of 2.5 million tons of alumina, basically returning to normal;
Since 0:00 yesterday, Debao County and Jingxi City in Baise City have also lifted the control measures of “no entry and exit”. Currently, precise prevention and control policies are implemented to further strengthen medium and high risk areas, as well as closed control areas, control areas, and prevention areas. epidemic prevention and control. The production and operation of electrolytic aluminum and alumina enterprises in this area are still affected to a certain extent, including a production capacity of 665,000 tons of electrolytic aluminum and a production capacity of 5.4 million tons of alumina.
The Baise region has achieved the goal of “three clearings” for seven consecutive days, and has entered the stage of consolidating the results of prevention and control and restoring economic and social development in a comprehensive and orderly manner. It is expected that the arrival of alumina and electrolytic aluminum in South China will continue to improve starting this week, and there is still a risk of falling premiums and discounts in South China, and the upward pressure on domestic alumina prices may appear.
03 The accumulation rhythm is differentiated
The current aluminum price is still at a high level, which suppresses downstream purchasing demand to a certain extent. At the same time, the production of some enterprises in Henan, Shandong and other regions has not been fully resumed due to environmental protection policies, and the inventory of aluminum ingots has maintained a trend of accumulation. From the point of view of accumulative storage increment, the accumulated storage volume during the Spring Festival this year to the second week after the holiday is about 356,000 tons, which is lower than the accumulated storage level of 398,000 tons in the same period last year, and also lower than the level of 403,000 tons in the same period of the previous year. Whether in terms of absolute quantity or relative increment, the current inventory pressure on the electrolytic aluminum end is not large.
In addition, the current aluminum bar inventory has shown an obvious turning point. On the one hand, the aluminum bar processing fee has rebounded significantly compared with that before the festival, and the processing enterprises are more willing to start construction after the festival. On the other hand, after the Lantern Festival, most terminal enterprises resumed work and production, and the demand for aluminum profiles improved significantly, which led to the destocking of aluminum rods. It is expected that with the continuous recovery of terminal consumption and the continuous depletion of aluminum rod inventories in the later period, the proportion of aluminum water in aluminum plants will increase, and the inflection point of aluminum ingot inventory may arrive earlier than the previous period.
In terms of domestic fundamentals, the epidemic situation in Guangxi has basically eased, the pressure on the supply of electrolytic aluminum has increased, and the arrival of goods in South China has further improved, and the local premium and discount will continue to fall. The domestic alumina supply will increase significantly, and the alumina price will face certain pressure. With the continuous improvement of prevention and control measures, the impact of the epidemic on prices will continue to weaken, and sporadic epidemics in Yunnan, Inner Mongolia and other regions have little impact on market sentiment. The current inventory pressure is not obvious, and the aluminum bar inventory has shown a clear inflection point. In the context of resumption of work and production, once prices fall, downstream purchasing sentiment will improve significantly.
The negative factors are gradually realized, and the focus in the later stage is on the production and resumption of production on the supply side. The short-term Ukrainian-Russian geopolitical conflict is still the main factor affecting prices. If the conflict triggers sanctions on Rusal, it will exacerbate the supply shortage situation in Europe and push prices up further. Therefore, under the background that the current negative factors are not prominent for the time being, it is still recommended to do more on dips.
Post time: Feb-23-2022