In July, the average spot price of aluminum ingots generally showed an upward trend, and the operating range was 18,700-19,900 yuan/ton. According to data, the average price of domestic aluminum ingots in the East China market on July 30 last Friday was 19,856.67 yuan/ton, compared with the market average price 18830 yuan/ton at the beginning of the month, an increase of 5.45%. Taking the average market price of aluminum ingots at the beginning of the year (January 1, 2021) at RMB 15,726.67/ton as the benchmark price, it has now increased by 26.26%.
The off-season is not short. Why do aluminum prices continue to be strong?
1. Macro policy factors
Central banks of various countries have implemented super-loose monetary policies, and the overall commodity is showing an inflationary trend. The current policy is still in a loose state.
2. Electricity factors affect production capacity
The summer peak of electricity consumption is coming, and the recent power load of China Southern Power Grid has risen sharply. Following the power rationing in Yunnan, provinces such as Guangxi and Guizhou have increased their electrical power. The electrolytic aluminum plants in Yunnan Province may be required to increase the output from the previous 25% level to 30%. The electrolytic aluminum plants in Guizhou and Guangxi also started small power cuts two weeks ago. Some aluminum companies chose to perform annual maintenance in advance or reduce the load a little to deal with it. , In July, the power rationing requirements became stricter, and Guizhou enterprises were required to cooperate with the staggered power consumption. The shutdown of production capacity in Yunnan is almost hopeless in July, with a monthly reduction of more than 70,000 tons. Guangxi Power Grid issued a notice of orderly power consumption for peak avoidance and load reduction of 3 million million. Among them, the Baise Power Grid reduced the load by 500,000 kilowatts, the Guest Power Grid reduced the load by 300,000 MWh, and the Nanning Power Grid reduced the load by 360,000 kWh. According to the demand for load reduction in various places, the influence of electrolytic aluminum production capacity in the region may exceed 100,000 tons.
3. Growth in demand for aluminum for green economy transition due to dual-carbon policy factors
On July 28, according to statistics, the domestic social stock of electrolytic aluminum was 765,000 tons, a decrease of 36,000 tons from the previous week, especially in Shanghai, Wuxi and Nanhai. The unexpected reduction in domestic supply due to “dual control” and power constraints has led to a reduction in annual output (estimated value) from 40 million tons to 39.53 million tons. In the first half of the year, the apparent consumption of domestic electrolytic aluminum was 19.98 million tons, a year-on-year increase of 9.6%.
List of negative factors:
1. High aluminum prices are under pressure on downstream terminals
The current price is at a relatively high level in the past ten years. Although the downstream terminals are rising, they are currently under greater pressure.
2. The State Reserve sells reserves to stabilize aluminum prices
The second round of dumping of reserves began, and the second batch of dumped reserves of 90,000 tons, slightly lower than the 100,000 tons generally expected by the market. The market expects that the National Reserve will start to dump reserves or by the end of the year, it will be around 50,000 tons per month.
3. The import window opens
In the first half of the year, the apparent consumption of domestic electrolytic aluminum was good and the price difference between inside and outside was superimposed, and the window for importing aluminum ingots opened.
Russia plans to increase tariffs on exported aluminum ingots from August to the end of the year, which will have little impact, but to a certain extent the import window will be slightly closed. It is good for aluminum ingot prices to a certain extent, but August is still in the off-season, and domestic demand is expected to slow down, posing a certain downside risk to aluminum prices.
Relevant analysts believe that the current price range of 18500-20000 yuan/ton is a steady-state shock range formed by market games. It is expected that the price of aluminum ingots will continue to be mainly around 19,000 yuan/ton in the near future, and overall, the short-term downside risk will be weakened.
Post time: Aug-03-2021