Affected by factors such as the slump in China's stock market and the unresolved Greek debt, Shanghai's aluminum prices plummeted last week. The main contract price once fell to 11975 yuan, hitting a six-year low. After that, the government's bailout policy was frequent and aluminum prices rebounded. On July 14, the main contract closed at 12,405 yuan. Despite the sharp rebound in aluminum prices, the fundamentals have not improved significantly:
First of all, the supply is not reduced, but it is increasing. Along with the collapse of aluminum prices, there has been very little news of aluminum production cuts, but new capacity in low-cost areas is still eager to start production. Recently, Xinjiang's Asia Aluminum Industry Co., Ltd. started the newly built capacity of 250,000 tons, and plans to expand its operating capacity to 850,000 tons by the end of July. Xinjiang Oriental hopes that the newly built 900,000 tons capacity will be gradually started, in addition to some completed capacity. In a wait-and-see attitude, the static aluminum price rebounded and then started production capacity. On the other hand, the news of production cuts and production stoppages is very scarce. Recently, only a small amount of production has been reduced in Henan. For the current operating capacity of more than 31 million tons, this small amount of production has almost no trace of the market.
Second, consumption is sluggish and destocking is slow. Affected by factors such as the sluggish real estate market and the decline in the growth rate of automobile production and sales, this year’s consumption is exhausted. From May to June, the market entered the traditional consumption season, and orders for aluminum processing enterprises improved slightly, but still not as good as the same period last year. Since entering the market in July, the market has entered the low season of traditional consumption, and aluminum processing companies have generally responded, orders have decreased again, and demand has weakened. The slow destocking speed also confirms this fact. Up to now, the total social inventories in the four regions of the country have reached 1.01 million tons, which is only 190,000 tons lower than the peak of 1.2 million tons in the year. In the same period last year, the inventories of aluminum ingots fell from the peak of 1.3 million tons at the beginning of April to around 830,000 tons in mid-July.
Again, costs are still in a downtrend. Affected by the increase in the proportion of self-supplied electricity, the lower coal prices, the weak alumina prices, and the implementation of preferential electricity prices, the average cost of the aluminum industry has been declining this year. As of now, the full cost-weighted average of the aluminum industry accounted for by Nancun Business Network is around 13,000 yuan/ton, while the cash flow cost is around 11,600 yuan/ton. Recently, coal prices have begun to show signs of bottoming out, but they still do not have the conditions for a sharp rise. In addition, the weak price of alumina is difficult to change, and it is expected that there will still be room for downward adjustment in the later period, which means that the average cost of the industry still has room to fall.
Keywords: aluminum ingot, aluminum alloy, aluminum oxide, aluminum alloy