Aluminum prices rose sharply in the first half of 2021, from US$2,400 to US$3,000 in May. What caused the price of aluminum to rise so fast?
It is understood that according to the press conference of China International Aluminum Week, the China Nonferrous Metals Industry Association pointed out that there are several reasons for this round of Shanghai Aluminum's price increase:
1 Macro policy impact
During the Spring Festival, Lun Aluminum strengthened. On the one hand, the U.S. dollar index fell, and on the other hand, external stocks declined during the Spring Festival. In addition, it is worth noting that the recent overseas epidemic has shown signs of easing, and the number of new confirmed cases of new crowns in the United States Significant decline and the dawn of global economic recovery are positive for aluminum prices. The US$1.9 trillion epidemic relief plan superimposed on the effective promotion and use of vaccines, the epidemic situation is improving, the economic recovery is expected to strengthen, and the infrastructure stimulus policy is expected to promote the outbreak of the metal market. On the other hand, inflation trading broke out more than expected, and the bulk commodity market ushered in a strong upward cycle.
Domestically, according to surveys, there are many migrant workers in Guangdong. Most workers go home for the New Year. Only a very small number of workers stay in place. Processing companies are expected to start work between the tenth of the first month and the fifteenth of the first month. Most workers in Henan are locals, and the main factors affecting the operating rate are orders and funds. This year’s orders have performed well, and the number of orders that have not passed the machine is higher than in previous years; the funds have been partially resolved by means of pledges, and the production in this region is relatively good compared to previous years. The proportion of migrant workers who celebrate the New Year in East China is higher than that in other regions. After the Spring Festival holiday, the speed of resuming work is worth looking forward to.
2 High supply of molten aluminum, low inventory of extruded aluminum ingots
According to industry sources, one of the reasons for the increase in aluminum prices is the logistics bottleneck, and this problem cannot be solved in the short term. As the current proportion of aluminum ingot production is declining, although the overall supply of electrolytic aluminum has increased, the supply of aluminum ingots has declined.
In January 2021, the weighted aluminum water ratio of the aluminum industry was 64.61%, which was only 3.61% lower than the previous month; that is to say, the monthly increase in aluminum ingots was roughly 120,000 tons, a year-on-year decrease of about 180,000 tons compared with previous years.
In terms of inventory, the current social inventory is slightly accumulated, and it exceeded 1 million tons after the holiday, which is in line with market expectations. After the holiday, the accumulated inventory of the factory is within the range of 11.47-235.5 million tons, which is relatively small compared to the same period last year. According to statistics, as of February 18, the social inventory of electrolytic aluminum was 901,000 tons, and during the Spring Festival, 126,000 tons were accumulated. Wuxi, Nanhai and Gongyi regions contributed to the main increase. In the same period last year, the social inventory of electrolytic aluminum was 116.20 tons, which shows that electrolysis The supply of aluminum is not as fast as the demand, and the cumulative range of social inventories is not as good as last year, which will help aluminum prices rise.
3 Inner Mongolia production capacity control
According to market news, the Inner Mongolia region will implement capacity control on electrolytic aluminum with higher energy consumption due to the failure to complete the energy consumption "dual control" target; market rumors are that electrolytic aluminum enterprises in eastern Inner Mongolia will not meet the overall energy consumption standard in the autonomous region in 2020, or may reduce production , It is reported that the preliminary plan of Jinlian, Huomei and other electrolytic aluminum enterprises will reduce production on a maintenance basis, and the annual production capacity of the entire eastern Inner Mongolia region may be affected at about 100,000 tons.
4 Supply side
According to data from the National Bureau of Statistics, in December 2020, my country's electrolytic aluminum production was 3.268 million tons, an increase of 2.70% month-on-month, an increase of 7.60% year-on-year, and a year-on-year growth rate of 8.3 percentage points higher than the previous year. From January to December 2020, my country's cumulative production of electrolytic aluminum was 37.08 million tons, an increase of 4.90% year-on-year, and the year-on-year growth rate was 5.8 percentage points higher than the previous year. In terms of production costs, the average production cost of electrolytic aluminum this week was 13,531.16 yuan/ton, and the average profit of electrolytic aluminum was 2,168.84 yuan/ton, which was an increase of 526.38 yuan/ton from last week. The production cost of electrolytic aluminum this week was at the lowest level in 5 years, and the profitability of electrolytic aluminum was at the highest level in 5 years. Although the profitability of electrolytic aluminum is at a high level, the release of production capacity in the southwest region is not as expected. Overall, the growth rate of electrolytic aluminum supply is not as fast as the growth rate of demand, and the fundamentals of the aluminum market are on the high side.
To sum up, on the one hand, the overseas epidemic has slowed down and Lun Aluminum has strengthened, boosting Shanghai Aluminum; on the other hand, the release speed of domestic electrolytic aluminum production capacity is not as fast as the demand recovery speed, resulting in social inventory accumulation that is less than expected. In addition, this year my country's "New Year in Place" initiative is expected to enable downstream companies to quickly resume work and production, and consumption may not be slow in the off-season.