Monthly Prosperity Index Report of China's Aluminum Smelting Industry (June 2021)

According to the model monitoring results, in June, China’s aluminum smelting industry prosperity index was 54.2, a decrease of 1.1 points from the previous month, which was in the upper part of the “normal” range; the leading composite index was 83, a decrease of 0.5 points from the previous month, with a monthly decline Narrowed down.

The prosperity index dropped slightly in the normal range

In June 2021, China’s aluminum smelting industry prosperity index has declined since March 2020, falling 1.1 points from the previous month to 54.2, which is in the upper middle of the “normal” range.

In June, among the 10 indicators that make up the industrial prosperity index, 6 indicators including M2, commercial housing sales area, alumina production, electrolytic aluminum production, power generation and total aluminum exports were all in the “normal” range; LME aluminum settlement Three indicators such as price, main business income and total profit are in the “hot” range; the total investment in aluminum smelting is in the “cold” range.

The leading synthetic index declines narrowed

In June, the leading composite index was 80.3, down 0.5 points from the previous period, and the decline narrowed by 0.5 points. Among the five indicators that make up the leading composite index, after seasonal adjustment, the indicators that fell from the previous month include commercial housing sales area and power generation, which fell 0.2% and 0.3%, respectively; the indicator that fell year-on-year was the total investment in aluminum smelting, which fell 14.2%.

Industry operation characteristics and situation analysis

In June, the aluminum smelting industry basically continued its May operation and continued to be in a normal business range. The industry’s regional supply constraints still exist. The demand in major consumer areas is basically stable, the cost-end prices of energy and electricity have risen, and the overall aluminum price has maintained a range of fluctuations. The specific performance is:

First, the resumption of production of electrolytic aluminum fell short of expectations, and the supply was stable and declining. In June, the national electrolytic aluminum output was 3.29 million tons, a decrease of 0.9% from the 3.32 million tons in May, and it fell for two consecutive months. In mid-to-late May, Yunnan Province initiated emergency peak-shift power rationing, and the province’s electrolytic aluminum production capacity was suspended and reduced by more than one million tons. After entering June, due to the weather, the resumption of production was postponed again, and the completed production capacity was difficult to put on schedule. At the same time, there are also power shortages in Inner Mongolia, Henan and other places. It is expected that the nationwide power supply shortage will be difficult to recover in a short time. As of the end of June, the national electrolytic aluminum operating capacity was about 38.8 million tons/year, a decrease of about 100,000 tons/year from the previous month, and a decrease of about 600,000 tons compared with the beginning of the year. However, considering the high aluminum prices in the second quarter of this year, the cumulative Output increased by 10.1% year-on-year to 19.64 million tons.

In June, the domestic alumina production capacity was 1 million tons/ton. As of the end of June, the completed alumina production capacity reached 90.15 million tons/year, an increase of 1.1% from the previous month.

Affected by the relationship between domestic and foreign prices, the import volume of unwrought aluminum and alumina in June showed a month-on-month increase and a year-on-year decline. However, the trade volume had a smaller impact on the balance of supply and demand than output. Among them, the import of unwrought aluminum was 250,000 tons, an increase of 34.1% month-on-month and a decrease of 2.5% year-on-year; the import of alumina was 280,000 tons, an increase of 89.7% month-on-month and a year-on-year decrease of 34.9%.

Second, domestic sales and exports fell slightly from the previous month, and overall aluminum consumption continued to perform well. The overall domestic economic operation remains stable and recovering. In the first half of this year, the national infrastructure investment increased by 7.8% year-on-year, and the two-year average growth rate was 2.4%, a decrease of 0.2 percentage points from the previous five months; the real estate development investment increased by 15.0% year-on-year, and the two-year average growth rate was 8.2%, compared with the previous five months. A decrease of 0.4%; the national power grid project completed investment of 173.4 billion yuan, a year-on-year increase of 4.7%. Affected by the insufficient supply of chips, automobile production and sales continued to fall in June, with production and sales of 1.943 million and 2.015 million vehicles respectively, down 4.8% and 5.3% month-on-month and 16.5% and 12.4% year-on-year. However, the production and sales of new energy vehicles continued to maintain rapid growth, and the market penetration rate continued to increase in June, reaching 12.8%. In addition, with the acceleration of photovoltaic installations, it will also contribute to the growth of aluminum consumption. In May, the national aluminum output was 5.43 million tons, with a daily output of 180,000 tons, an increase of 3.7% from the previous month.

Affected by the foreign epidemic situation, the recovery of overseas economic demand is progressing faster than the recovery of supply in stages, and the export of aluminum materials continues to grow. In June, aluminum exports were 441,000 tons, an increase of 4% month-on-month and 28.7% year-on-year; the cumulative exports in the first half of the year were 2.52 million tons, an increase of 12.1% year-on-year. In June, Brazil and the United Kingdom initiated two new trade remedy investigations against China’s aluminum sheet, strip, and aluminum extrusion materials. The GCC and India made final tax rulings on China’s aluminum sheet, strip, and aluminum foil trade frictions. Challenges and pressure remain. However, under the severe trade friction situation, positive results have been achieved through the active response of industry enterprises. For example, the anti-dumping defense of Brazil’s aluminum sheet, strip and foil industry has successfully ruled out one third of the products involved, and Thailand’s aluminum foil safeguard measures industry has passed the non-damage defense. Questioning the industry representativeness of the complainant and striving to close the case without measures, Colombia announced the termination of anti-dumping measures against China’s aluminum extrusions.

Third, the effect of maintaining supply and stabilizing prices has appeared, and aluminum prices have remained range-bound. Since the government took various measures to ensure the supply and stability of bulk raw materials in May, aluminum prices have dropped from a high level. However, considering that the domestic electrolytic aluminum supply and demand are still in tight balance, in June, the Shanghai aluminum price remained between 18,200 and 19,200 yuan/ton. Fluctuations, the monthly average price was RMB 18,587/ton, which was a 2.9% decrease from the average price of RMB 19,146/ton in May. While aluminum prices have fallen slightly, the profit margin of the electrolytic aluminum industry has narrowed due to the impact of rising coal and electricity prices. In June, supported by factors such as the tightening of domestic bauxite supply, rising sea freight charges for imported bauxite, and rising prices of raw materials such as coal and caustic soda, the domestic price of alumina per ton rose to around 2500 yuan.

From the perspective of the entire industrial chain of the aluminum industry, aluminum smelting is still a link with a higher level of profitability. In the first five months, the aluminum industry as a whole (including mining, smelting, and processing) realized a profit of 61.3 billion yuan, a year-on-year increase of 792.1%, of which the profit of aluminum mining and dressing was 32.77 million yuan, a year-on-year increase of 188.5%; the profit of aluminum smelting was 44 billion yuan , A year-on-year increase of 1406.3%; aluminum processing profit was 17.2 billion yuan, a year-on-year increase of 331.4%. In the first five months, the aluminum industry’s sales profit rate was 7.1%, compared with 1.1% in the same period last year; the asset-liability ratio was 60.7%, compared with 65.3% in the same period last year. Among them, the aluminum smelting industry has a high sales profit margin, reaching 12.6%, compared with 1.1% in the same period last year. After seasonal adjustments, in May, the aluminum smelting industry (including alumina, electrolytic aluminum and secondary aluminum) realized a profit of 11.4 billion yuan, an increase of 12.4% from the previous month.

In the second half of the year, the economic operation of the aluminum smelting industry will be affected by domestic and foreign monetary policy adjustments, the timing and amount of national reserves, power rationing in Yunnan and production restrictions in Inner Mongolia, changes in the supply and price of resources such as bauxite and coal, and trade frictions, etc. Many uncertain factors. However, considering that the national economy as a whole will continue to maintain a stable recovery development trend, we expect that the aluminum smelting industry will continue to operate in the “normal” range for a period of time in the future. (Written by Mo Xinda)

Note:

1. The leading composite index of aluminum smelting industry prosperity (abbreviated as: leading index) is used to judge the recent trend of changes in the economic operation of the aluminum smelting industry. The index is composed of the following five indicators: LME aluminum settlement price, M2, total fixed asset investment in aluminum smelting projects, commercial housing sales area, and power generation.

2. The consistent composite index of the aluminum smelting industry (abbreviated as: the consistent index) reflects the current economic operation of the aluminum smelting industry. The index is composed of the following five indicators: electrolytic aluminum output, alumina output, aluminum smelting enterprise operating income, total aluminum smelting enterprise profit, and total aluminum export.

3. The lagging composite index of the aluminum smelting industry (abbreviated as: lagging index) and the consistent index are mainly used to monitor the trend of economic changes and play a role of post-mortem verification. The index consists of the following three indicators: the balance of working capital of aluminum smelting companies, the balance of accounts receivable of aluminum smelting companies, and the balance of finished products funds of aluminum smelting companies.

4. The comprehensive prosperity index reflects the current prosperity of the aluminum smelting industry. The economic status of the aluminum smelting industry is divided into five levels by the boom light chart. A “red light” indicates that the economy is overheated, a “yellow light” indicates that the economy is overheated, a “green light” indicates that the economy is operating normally, and a “light blue light” indicates that the economy is biased. Cold, “blue light” indicates that the economy is too cold. Different weights are assigned to individual indicator lights, and the comprehensive prosperity index that is aggregated is also displayed by 5 light areas.

The comprehensive prosperity index is composed of 10 indicators, namely, the constituent indicators of the leading index and the consistent index.

5. All indicators used to compile the index have been adjusted seasonally, and seasonal factors have been eliminated.

6. The previous monthly prosperity index will be revised every month. When a new month’s data is added to the time series, the previous monthly prosperity index will change more or less, which is the result of the model’s automatic correction.

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