China’s aluminum consumption is basically stable, and the margin of overseas demand recovers
From the perspective of terminal consumption structure, construction, transportation and cables account for 66% of my country’s electrolytic aluminum demand, of which construction accounts for the largest proportion, reaching 29%. The demand is mainly concentrated in real estate. The completion cycle of real estate may be the biggest driving force to drive aluminum terminal consumer demand.
Figure 22: China’s electrolytic aluminum consumption structure in 2020
The downstream operating rate of aluminum dropped slightly seasonally
According to SMM statistics, in June 2021, the operating rates of China’s aluminum profile, aluminum rod wire, aluminum plate, strip and foil, and recycled aluminum alloy enterprises were divided into 61.35%, 41.32%, 79.65%, and 56.73%, which were -1.98ppt, -0.50ppt, and -0.50ppt. +8.95ppt, +8.73ppt, chain ratio -0.30ppt, +0.48ppt, -0.27ppt, -2.83ppt. The aluminum rod processing fee is 215 yuan/ton this week, which is +15 yuan/ton compared to last week.
Chart 23: The start of aluminum profile enterprises
Chart 24: The resume production situation of aluminum bar/rod and wire enterprises
Chart25: The resume production situation of aluminum sheet, coil, stip and foil enterprises
Chart 26: The resume production situation of secondary aluminum alloy enterprises
Real estate investment continues to pick up
According to statistic data from the National Bureau, in June 2021, the area of completed housing construction was +25.7% year-on-year; the amount of real estate development investment completed was +15.0% year-on-year; the floor area of housing construction was cumulatively +10.2% year-on-year; the floor space newly started was +3.8% year-on-year; commercial housing The cumulative sales area was +27.7% year-on-year.
Looking back at history, there is a “scissors gap” between the new start and completion of real estate. The time difference between the peak sales and the peak completion is usually 2-3 years. The last round of sales peaks occurred in 2016-2018, which means that the peak of completion is approximately from 2019. From the data point of view, the year-on-year growth rate of the completed area in 2017 and 2018 was -4.4% and -7.8%, respectively, and the year-on-year growth rate in 2019 was 2.6%, which also supports this judgment. We expect the completion end to pick up. It is expected to continue to drive the growth of aluminum demand. The post-real estate cycle supports the consumption of electrolytic aluminum. The completion of real estate in 2021 will continue to be in the process of recovery, which will help the continued growth of real estate demand.
Chart 28: Changes in real estate data (%)
New energy vehicles bring new growth
According to data from China Association of Automobile Manufacturers, automobile production in June 2021 was 1,943,300 units, -16.43% year-on-year, and -4.76% month-on-month. Among them, the production of new energy vehicles was 248,800 units, which was +143.07% year-on-year and +14.21% month-on-month. In terms of inventory, the inventory of auto manufacturers in June 2021 was 742,200, -23.66% year-on-year.
Affected by the call of the automobile lightweight trend and the stimulus of various automobile policies since 2020, new energy vehicles have strong future market potential, and we expect to continue to drive aluminum demand strongly in the future.
Chart 29: Domestic automobile production (10,000 units)
Chart 30: Domestic production of new energy vehicles (10,000 vehicles)
Chart 31: Inventory status of auto manufacturers
Chart 32: Inventory coefficient of auto dealers
Domestic power grid investment brings new highlights
State Grid announced in April 2021 that the 2021 power grid investment plan will be 473 billion yuan, higher than the 450 billion yuan in 2020. If we consider the investment of China Southern Power Grid and other companies, we predict that the power grid infrastructure investment in 2021 is expected to exceed 500 billion yuan. The State Grid Corporation of China has cumulatively completed and put into operation the “14 AC and 12 direct” UHV transmission projects, and the “3 direct” UHV transmission projects are under construction. We expect that the further expansion of grid investment is expected to drive the increase in aluminum demand.
In June 2021, the cumulative completed investment in power grid and power supply infrastructure was +4.65% and +8.92% respectively year-on-year.
Chart 33: Completed investment in power grid and power supply construction (%)
Chart 34: Grid infrastructure investment plan and completion amount (100 million yuan)
Demand for home appliances recovers quickly
In terms of production, the output of air conditioners, refrigerators and washing machines in June was 15.285, 671.5 and 5.469 million units. The cumulative output was +14.89%, +16.58% and +20.48% year-on-year, and the month-on-month ratio of air conditioners was 8.15ppt. Refrigerators continued after turning negative in March last year. It is negative, the chain ratio is -9.62ppt, and the washing machine chain ratio is -0.93ppt. In terms of inventory, the inventory of air conditioners, refrigerators, and washing machines in June was 1,944.9, 363.5, and 2.762 million units. The inventory of air conditioners and refrigerators decreased slightly from the previous month, but the three inventory values were all at historically high positions.
We believe that with the recovery of the completion of real estate, the sales of home appliances as a post-real estate cycle are expected to rise, especially in the context of the expansion of online sales channels by home appliance companies and the rapid development of the small home appliance industry in the long term.
Chart 35: Home appliance output
Chart 36: Inventory of home appliances
Aluminum exports increased slightly
According to the data of the General Administration of Customs, the export volume of unforged aluminum and aluminum products in July 2021 was 469,900 tons, +25.61% year-on-year and +3.22% month-on-month; cumulative exports were 3.0951 million tons, cumulative +12.7% year-on-year, and the overseas epidemic situation eased , Demand has steadily recovered. In terms of primary aluminum, cumulative exports from 2021 to the present have been zero.
Figure 37: China’s unforged aluminum and aluminum exports
Figure 38: China’s primary aluminum exports
Steady recovery of overseas demand
Although the pressure of the world’s epidemic prevention and control remains unabated, under the continuous monetary easing policies of central banks, governments of various countries have increased fiscal stimulus policies. Since May 2020, the economic prosperity of various countries has rebounded significantly. In July 2021, China’s official manufacturing PMI was 50.4, which was lower than the previous value of 50.9; in July, the US manufacturing PMI was 59.5, which was lower than the previous value of 60.6; in July, the Japanese manufacturing PMI was 53, which was higher than the previous value of 52.4; 7 The monthly Eurozone manufacturing PMI was 62.8, which was lower than the previous value of 63.4. In July, JP Morgan Chase’s global manufacturing PMI was 55.4, which was lower than the previous value of 55.5, but continued to be above the line of prosperity and decline, and the global economic prosperity rebounded significantly. The promotion of the new crown vaccine has warmed up market risk sentiment, and the recovery in global demand has driven commodities to basically look good.
Chart 39: Overseas PMI stabilizes and rebounds
The cost side benefits from the overcapacity of alumina, and the profitability of high-ton aluminum is strong.
Alumina prices continue to run low
The alumina price this week was 2,601 yuan/ton, a slight increase from last week. In terms of alumina profit, according to our calculations, the average profit of the alumina industry this week was -226 yuan/ton, and last week it was -253 yuan/ton. However, the situation of alumina overcapacity continues, and electrolytic aluminum companies generally are not willing to purchase, to a certain extent, to restrain the rise of alumina prices in order to control production costs. The price of alumina has not risen sharply along with the price of electrolytic aluminum because of the pressure on alumina production and import, and the profitability of the alumina industry is at the bottom of the cycle.
Chart 40: Alumina prices and industry profits
Alumina production capacity continues to remain in excess
According to SMM data, as of early August, China’s metallurgical-grade alumina production capacity was 72.08 million tons per year, which was +410,000 tons from the previous month. In July 2021, China’s alumina output was 6.293 million tons, of which metallurgical-grade alumina was 6.081 million tons. , The average daily output of metallurgical grade was 196,000 tons, a decrease of 0.34% month-on-month and +6.71% year-on-year.
Figure 41: Total alumina production capacity and operating capacity
Chart 42: Alumina production (10,000 tons)
According to Baichuan Information, it is estimated that the domestic alumina production capacity will be 10.6 million tons in 2021. Considering the corresponding electrolytic aluminum production capacity, the alumina production capacity is obviously surplus. At the same time, overseas alumina is expected to add 4.5 million tons of new capacity. We expect that the surplus will continue and the export window will still be closed. This will aggravate the surplus of the domestic alumina market and put further pressure on the domestic alumina market price.
Alumina imports continue to maintain high growth
In recent years, due to the relatively low overseas alumina prices, domestic electrolytic aluminum plants have gradually increased their demand for imported alumina. Since 2020, the amount of domestic imported alumina has increased significantly, and the influx of imported alumina into the country has made alumina prices at home and abroad converge. The trend is becoming more and more obvious.
Under the influence of the epidemic, the price of overseas alumina is relatively low, and the weakness of overseas alumina has promoted a substantial increase in alumina imports. According to statistics from the General Administration of Customs, China imported 354,700 tons of alumina in June 2021, representing a month-on-month increase of +144.13%. In terms of exports, in June 2021, alumina exports were 0.5 million tons, a month-on-month increase of +6.66%.
Figure 45: The window for alumina imports at home and abroad is often open (yuan/ton)
Chart 46: Alumina imports (10,000 tons)
Chart 47: Alumina exports (10,000 tons)
Other costs of electrolytic aluminum rising
The market price of thermal coal in Qinhuangdao this week was 1082.5 yuan/ton, -0.46% on a week-on-week basis. The average price of pre-baked anodes this week was 4761.25 yuan/ton, with a week-on-week ratio of +0.91%. The price of cryolite is 6000 yuan/ton, the same as last week. The price of aluminum fluoride is 7,700 yuan/ton, +3.36% week-on-week.
Chart 48: Thermal coal prices (yuan/ton)
Figure 49: Price of pre-baked anodes (yuan/ton)
Chart 50: Cryolite price situation (yuan/ton)
Figure 51: The price of aluminum fluoride (yuan/ton)
Aluminum Industry Weekly Update
Henan epidemic weakens electrolytic aluminum demand
My nonferrous network: Zhengzhou government requires that from August 2nd, a 48-hour negative nucleic acid test report must be provided in and out of Zhengzhou. The transportation of aluminum ingots in Henan is blocked, the shipment of aluminum processing enterprises is not smooth, and the consumption of electrolytic aluminum is declining. For example, due to the shortage of aluminum ingot supply, the spot discount of electrolytic aluminum in Gongyi area was narrowed from 100-120 yuan/ton to 70-80 yuan/ton. Although the Zhengzhou Bureau will resume the cargo receiving and unloading function on the evening of the 5th, it is expected that aluminum ingots will be concentrated in Gongyi on the weekend to alleviate the local aluminum ingot shortage. However, due to the current low season of traditional consumption and high aluminum prices, the downstream procurement enthusiasm is inhibited. , Consumption will hardly pick up in the short term.
When the peak season for aluminum electrolytic capacitors is approaching, the original factory plans to increase prices by 10%-15%
SMM: Recently, the epidemic situation in Malaysia has not improved. It is expected that the complete blockade will be difficult to lift in the short term, which has disrupted the already tightened supply of aluminum electrolytic capacitors. As the world’s major production base for aluminum electrolytic capacitors, mass production at the Malaysian factory was forced to be interrupted during the peak demand season, which undoubtedly made the current tight supply situation worse. Recently, the world’s top three aluminum electrolytic capacitor suppliers, Jiamei, Nichicon, and Ruby, have increased the originally planned price increase from 9% to 12% to 10% to 15%. The main reason is that the epidemic has caused capacitors. Impaired production capacity.
Carbon boundary may affect China’s steel and aluminum exports
China Energy Net: The European Union’s aggressive climate policy reforms will have a profound impact on the carbon market, aviation and shipping, energy, steel, aluminum and other fields and industries. In the long run, carbon prices will increase with the continuous tightening of carbon market quotas and climate policies. For example, after undergoing the last European carbon market reform in 2018, carbon prices have gradually increased from 5 euros/ton to 20-30 euros/ton in a few years. The continuous rise of carbon prices may affect the export of some commodities in China after the carbon border adjustment mechanism is launched, especially aluminum and steel, which account for 9% and 8% of the EU’s total imports, respectively.
Post time: Aug-11-2021