Operation characteristics and situation analysis of the aluminum industry

According to the model monitoring results, in June 2021, 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 83.0, a decrease of 0.5 points from the previous month, a decrease Narrowing month by month.

1. 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 2021, among the 10 indicators that make up the industrial prosperity index, M2, commercial housing sales area, alumina production, electrolytic aluminum production, power generation, and total aluminum exports are all in the “normal” range; LME The three indicators of aluminum settlement price, main business income and total profit are in the “hot” range; the total investment in aluminum smelting is in the “cold” range.

2. The leading synthetic index declines narrowed

In June 2021, the leading composite index was 80.3, down 0.5 points from the previous period, and the decline narrowed by 0.5 points. Figure 2 shows the composite index curve of China’s aluminum smelting industry. 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 and power generation, which fell by 0.2% and 0.3%, respectively; the indicator that fell year-on-year was the total investment in aluminum smelting, which fell by 14.2%.

3. Industry operation characteristics and situation analysis

In June 2021, the aluminum smelting industry basically continued its May operation and continued to be in a normal economic 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 this year, 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 weather conditions, 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 production 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 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, but 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% 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 accelerated construction of photovoltaic installations, it will also contribute to the growth of aluminum consumption. In May of this year, the national aluminum output was 5.43 million tons, and the daily output was 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 of this year, the export of aluminum products was 441,000 tons, an increase of 4.0% from the previous month and a year-on-year increase of 28.7%; the cumulative exports in the first half of the year were 2.52 million tons, a year-on-year increase of 12.1%. The monthly changes in aluminum exports are shown in Figure 4. In June of this year, Brazil and the United Kingdom initiated two new trade remedy investigations on 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. The foreign trade environment The challenges and pressures still remain. However, under the severe trade friction situation, positive results have been achieved through the active response of enterprises and industries. 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 country took various measures to ensure the supply and stability of bulk raw materials in May this year, aluminum prices have fallen 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 at 18,200 to 19,200 yuan/ton. The monthly average price was RMB 18,587/ton, a decrease of 2.9% from the average price of RMB 19,146/ton in May. The main contract price trends of Shanghai Aluminum are shown in Figure 5. 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 price of domestic alumina per ton rose to around RMB 2,500.

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 of this year, the aluminum industry as a whole (including mining, smelting, and processing) realized a profit of 61.3 billion yuan, 792.1% year-on-year, of which the profit of aluminum mining and dressing was 32.77 million yuan, an increase of 188.5% year-on-year; 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 sales profit rate of the aluminum industry 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 this year, 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. Figure 6 shows the profitability of the aluminum smelting industry after seasonal adjustment.

In the second half of this year, the economic operation of the aluminum smelting industry will be affected by changes in domestic and foreign monetary policies, the timing and quantity 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 friction. And many other 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.

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