Author: Li Jun
Recently, power supply in the south has become tight again, Guangxi and Yunnan regions have started power-cutting policies again, and Yunnan’s power-cutting policies for electrolytic aluminum have been upgraded. As a result, the production of electrolytic aluminum enterprises will be affected again, and the supply of electrolytic aluminum will be tight. It will continue to be maintained, but the regulator has made it clear that it wants to maintain supply and stabilize prices. Recently, the second batch of State Reserve aluminum ingots dumped reserves. It is not ruled out that subsequent dumping of reserves is not ruled out. The state’s attitude to curb the rapid rise of bulk commodity prices will restrict the upward trend of aluminum prices. Intensity. On the whole, aluminum prices may see a slight increase.
High raw material prices
Strengthening of the cost support of electrolytic aluminum
In the medium and long term, due to the impact of carbon peak and carbon neutrality, more clean energy will be put into use, and thermal coal production capacity will be suppressed. However, in the short term, electricity consumption in many places in my country hit a record high this summer. The demand for thermal coal is strong. In the short term, the supply of thermal coal is tight and the demand is strong, leading to the continued high price of thermal coal. As of July 29, the price of thermal coal in Qinhuangdao was 1072.5 yuan/ton. As far as the production cost of electrolytic aluminum is concerned, the cost of electricity accounts for about 35%. Therefore, the high price of thermal coal will strengthen the cost support of electrolytic aluminum.
Resurgence of power rationing
Electrolytic aluminum production capacity is suppressed
In mid-May, the peak power curtailment in Yunnan caused local electrolytic aluminum companies to be unable to produce at full capacity. In July, the power supply in West Inner Mongolia also began to be tight. Starting from mid-July, the local electrolytic aluminum production enterprises started operations. It has also been affected. On the whole, the peak power consumption of this summer caused a short supply of electricity, which also had a certain impact on the production of electrolytic aluminum.
According to Aladdin’s investigation and understanding, due to the rapid increase in the load of the Southern Power Grid, the aluminum enterprises in Guangxi are facing the pressure of orderly use of electricity to varying degrees, and a new electrolytic aluminum project is temporarily postponed. In addition, the electrolytic aluminum enterprises in Yunnan area were again required to limit the load. This time the limit reached 30%. Even in May, the supply of electrolytic aluminum was tightened again due to the power limit, and aluminum prices would be boosted.
Inventory continues to fall
A short-term weaker U.S. dollar boosts aluminum prices
In terms of demand, the real estate and automobile industry data of the end-demand industries still performed well. Although the production and sales data of the automobile industry showed negative growth in the past two months, at the press conference of the Information Office of the State Council on July 23, the Market Operation and Consumption Promotion Department of the Ministry of Commerce Director Zhu Xiaoliang said that in the next step, the Ministry of Commerce will work with relevant departments to promote automobile consumption in the whole chain. With the support of policies, it is expected that the performance of my country’s auto market this year will not be too bad. In addition, new energy industries, such as photovoltaic cables, also use aluminum. The photovoltaic market has also performed well this year, which will also boost the demand for aluminum.
In terms of social inventory, as of July 29, the social inventory of electrolytic aluminum in five locations according to SMM’s statistics was 758,000 tons, a decrease of 51 thousand tons from the previous week. Inventory in the same period last year was 712,000 tons. The inventory decline is still very strong, indicating that the production restrictions of electrolytic aluminum enterprises have caused tight supply in the aluminum market, and inventories continue to be consumed. In addition, after entering the second quarter, the social inventory of electrolytic aluminum has started a process of de-removal, which is expected to continue until the end of the year, or to provide support for aluminum prices.
On the macro level, the Federal Reserve announced that it will not raise interest rates temporarily, which has alleviated market concerns about tightening liquidity in the short term. From the perspective of US economic data, the actual annualized quarterly rate of GDP in the second quarter of the United States was initially 6.5%, and the previous value was 6.4%. 8.5% indicates that the U.S. economic recovery has not been smooth. Moreover, although the number of non-agricultural employment in the U.S. in the past two months has been better than expected, the unemployment rate is still not ideal, and it will take some time for the job market to recover. There are still some twists and turns. The short-term Fed is less likely to tighten liquidity. The US dollar index may enter a short-term correction soon, which will benefit aluminum prices.
Although there are many positive factors at present, the excessively high prices of bulk commodities have aroused continuous attention from the regulatory authorities. Recently, the second batch of aluminum ingots from the State Reserve has begun. With the continuous attention of the regulatory authorities, the upward movement of aluminum prices will inevitably be affected, and the upward space for aluminum prices is expected to be relatively limited.
In summary, the high thermal coal price has strengthened the support of the production cost of electrolytic aluminum, and the power curtailment policy is coming again, the production of electrolytic aluminum enterprises continues to be affected, and the aluminum supply side continues to be disturbed. From the perspective of demand, the performance of the real estate and automobile data in the terminal industry is acceptable, indicating that my country’s economy has continued to recover due to the proper control of the epidemic, and the US economy has not recovered smoothly. The performance of the main macro data is average, and the short-term Fed rate hike is unlikely. The U.S. dollar will also undergo a short-term correction, which is good for aluminum prices. However, the continued attention of my country’s regulators on bulk commodities will restrict the upward strength of aluminum prices. (Author’s unit: Guangzhou Futures)