Will aluminum be greener again?
Nov 10, 2017

Will aluminum be greener again?

In mid June to early 8 months aluminum prices rose sharply, out of a wave of small market, then aluminum prices stabilize, run the main shock, the price range in 16000-16400 yuan / ton.

At the beginning of November, aluminum prices for the first time in 16000 yuan / ton below the operation, in November 9th affected by the futures market, but also a rare drop of 1.61%.

According to the business community data show that, as of November 9th, aluminum (99.70) market average price of 15452.5 yuan / ton, compared with November 1 daily average offer 16167.5 yuan / ton, down 4.42%.

At present, the price broke 15500 yuan / ton, nearly a new low in March, but compared with 15 in June, the average daily price of 13380 yuan / ton, there are still 15.49% of the increase, compared with the beginning (1.1) were quoted 12975 yuan / ton, or 19.09%.

But the raw end of the high prices of alumina materials prices rose rapidly, cryolite, caustic soda, electrolytic power coal high stability, aluminum prices continue to support a strong, recent market volatility is not high probability down sharply.

The probability of short-term volatility of aluminum prices is not large, based on the following considerations:

1. policy support

Industry supply side reform brings capacity, superimposed "2+26+3" urban heating season limited production, to a certain extent, will ease the industry criticized high social inventory.

Since the beginning of this year, the social inventory of electrolytic aluminum in 8 places has increased from 360 thousand tons to 1 million 510 thousand tons, an increase of 1 million 150 thousand tons. SHFE aluminum inventory increased from 30 thousand tons to 563 thousand tons, an increase of 530 thousand tons.

It is reported that electrolytic aluminum social stock rose to 3 years high because the first half of the main electrolytic aluminum enterprises to maintain full production status, while due to illegal production capacity shutdown, resulting in a large number of aluminum water into aluminum ingot.

With the illegal production capacity shutdown, 2+26 city limit production, demand side began to enter the consumption peak season in 2017, social inventory in September or will gradually fall below 1 million 200 thousand tons, 2018 down to 900 thousand tons below.

It is reported that affected the supply side reforms, according to the situation of production has been completed and put into production, estimated at about 5 million tons, about 7 million tons of construction.

According to the China Nonferrous Metals Industry Association data, China's electrolytic aluminum output from June 2017's highest daily output of 97 thousand tons, down to the lowest daily output of 85 thousand tons in August.

According to the latest data in September, the daily output is 87 thousand tons. Daily decline of 10 thousand tons, the annual decline is expected to reach 3 million 450 thousand tons to 4 million tons.

2. industry chain price conduction cost factor supporting aluminum price

Raw material alumina and coal power account for about 80% of the cost of electrolytic aluminum.

As of August 2017, China's total alumina production capacity reached 79 million 980 thousand tons, with a capacity of 68 million 200 thousand tons, with an average operating rate of 86%.

According to the latest import and export data of the General Administration of customs, the total import of alumina in China was 275385 tons in September 2017, an increase of 93% compared with the same period of last year.

In January and September this year, China's alumina imports amounted to 2 million 230 thousand tons, an increase of 2.96% compared with the same period last year.

According to historical data and industry experience, alumina price is about 17.8% of electrolytic aluminum price, there is a certain price correlation.

Affected by environmental protection and electrolytic aluminum price rise, alumina prices have exceeded the historical high, Shandong today quoted 3850 yuan / ton (the beginning of the price of 2960 yuan, or 30.07%).

Uncertain factors

With the continuous reform of the supply side of China's electrolytic aluminum industry, electrolytic aluminum production capacity will be phased out, the policy to the production capacity and environmental supervision of aluminum upstream tightening, raw material prices will strongly support the bottom of the aluminum price.

However, the domestic aluminum inventories based on larger, as futures, aluminum prices by the capital market expectations and confidence on various factors, strengthen the aluminum market outlook is uncertain, but in the long term, the price of aluminum support.

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