Since the beginning of this year, the theme of the non-ferrous metal sector has been rotating. The most obvious increase was aluminum, and aluminum futures prices reached a maximum of 20,445 yuan/ton, a record high in the past 10 years.
Feng Fan, an aluminum analyst at Yide Futures, believes that the performance of aluminum prices far exceeds market expectations at the beginning of the year. There are three main reasons for the continued strength of aluminum prices:
Aluminum bar
One is the US$1.9 trillion stimulus policy at the beginning of 2021, which promoted a general increase in commodity prices, and Shanghai aluminum rose from 15,000 yuan/ton to 17,500 yuan/ton;
The second is the “carbon peak” policy that began in April. The restriction of carbon emissions led to a large-scale forced reduction in production in Inner Mongolia. Shanghai aluminum started to rise from 17,500 yuan/ton and directly exceeded 20,000 yuan/ton;
The third is the shortage of hydropower in Yunnan, the shortage of coal supply across the country and the sharp increase in electricity consumption year-on-year, resulting in a slowdown in the speed of new production capacity. Guangxi and Yunnan have been forced to reduce production, and the scope of production reduction may continue to expand by more than 1 million tons. Shanghai Aluminum rose.
Dongzheng Nonferrous Senior Analyst Sun Weidong told the Futures Daily reporter that the main reason for the current round of aluminum price rise is the large-scale reduction in the impact of limited power on the supply side. Since the beginning of 2021, the shortage of electricity supply across the country, especially in Yunnan and Guangxi, has severely affected the domestic electrolytic aluminum supply. The reduction in production due to power curtailment was 1.234 million tons. Recently, the impact of power curtailment in Guangxi is still deepening, and the scale of electrolytic aluminum production reduction may expand. At the same time, the consumer side showed strong resilience, and off-season inventories continued to deplete to a lower level, so aluminum prices continued to rise.
Aluminum tube
“The trend of subsequent aluminum prices still depends on the power supply.” Sun Weidong believes that investors need to focus on two points in the future:
First, the overall power supply situation in the country. It is expected that the coal supply tension may ease from September to October, but the increase in domestic coal demand after the heating season may once again cause power tensions to intensify;
The second is the problem of power supply in Yunnan during the dry season. After entering November, Yunnan will enter the dry season again, when hydropower utilization hours will be significantly reduced, which will greatly test the capacity of power regulation and storage. “It is expected that the strong trend in aluminum prices may continue until the end of the year.”
“In the first half of this year, the main reason for the sharp rise in copper prices was the accelerated recovery of the global economy in the post-epidemic era. The’carbon neutrality’ and new energy sectors have brought benefits to copper consumption, and the shortage of low inventories and high liquidity However, with the marginal weakening of the macro stimulus effect, the main logic driving commodity price increases in the second half of the year will return to the fundamentals, that is, the supply side is suppressed and the consumer side has good expectations of Shanghai aluminum varieties or become a stronger variety in non-ferrous products “Feng Fan believes that the average daily output of electrolytic aluminum has dropped from 10.83 tons to 10.57 tons in July. The power curtailment in Guangxi may affect the production capacity of more than 1 million tons. The supply side has been significantly suppressed, and the tight power supply has delayed the introduction of new capacity. Therefore, even after the peak electricity consumption period in the third quarter, the supply of electrolytic aluminum is difficult to increase, and the output of electrolytic aluminum in the third quarter may grow negatively from the previous month. On the consumer side, the current market’s dealings with the epidemic are gradually weakening, and overseas recovery is still continuing. Consumption in the off-season has shown a certain degree of resilience, and the peak consumption season is still worth looking forward to, and the fundamentals of aluminum product supply and demand are very healthy. Although there are disturbances of dumping reserves and lowering of export tariff rebates, it is difficult to reverse the current balance of supply and demand. Therefore, any short-term disturbance of aluminum prices can be used as a buying point for long positions.
Post time: Aug-17-2021