On the one hand, the overseas epidemic situation is complex, and there is no stable situation yet, which is expected to have an impact on aluminum consumption; on the other hand, despite the gradual pick-up of demand in March, inventory is in a continuous accumulation situation, and aluminum prices will maintain low volatility.

With the sudden outbreak of the recent overseas epidemic, the global financial market fell into panic and the price of aluminum fell sharply. At present, the domestic epidemic situation has been basically controlled, and all regions are actively and orderly resuming work and production. It is optimistic that the normal production level can be returned in the middle of March. However, due to the complexity of the overseas epidemic and the lack of a stable situation, it is expected that the aluminum consumption will be affected, and the aluminum price in the future will be easy to fall and hard to rise.

Capacity rising trend unchanged

As the profit level of electrolytic aluminum smelting continues to be at a high level in 2019, the smelting capacity has been rising since the fourth quarter, and new investment and re production capacity have contributed. In 2020, the rising trend of supply has not changed. In the first quarter, the new investment capacity is mainly concentrated in Southwest China, including the second phase of Heqing of Yunnan Aluminum and the first phase of Shenhuo of Yunnan Province, which started to be put into operation after the new year’s day, and the new production capacity of Zhongfu of Guangyuan continued to be put into operation. In addition to the new production, the production capacity is also more active before the saving. In the early stage, Qinghai, Xinjiang, Inner Mongolia and other places were forced to reduce production capacity due to accidents or losses. However, affected by the epidemic, some new projects and resumption plans had to slow down. In addition, Xinjiang, Inner Mongolia, Hubei and other places have also slowed down or shelved the resumption plan due to the epidemic.

According to statistics, at the end of February, the operation capacity of electrolytic aluminum in China was 37.22 million tons, an increase of 580000 tons compared with that at the end of 2019. Despite the impact of the epidemic on some production capacity delivery plans, it is expected that the capacity increment brought by the new investment and resumption of production in March will still be 100000-200000 tons. Therefore, the production capacity of electrolytic aluminum keeps rising.

The impact of overseas epidemic should not be underestimated

Different from the small impact of the supply side, the demand side is significantly affected by the epidemic. As of February 27, the national aluminum social inventory (aluminum ingot + aluminum bar) was 1623000 tons, an increase of 829000 tons compared with that before the Spring Festival. However, due to the inconvenience of transportation, the inventory in the factory was nearly 440000 tons, which shows that the accumulated inventory range is much higher than expected.

With the gradual control of the epidemic, production has been resumed all over the country in the near future. However, due to the isolation of returning employees and the incomplete recovery of transportation between regions, the resumption of work is relatively slow. As of this week, the operating rate of aluminum processing industry is expected to be about 50%, and it is estimated that the overall resumption of work nationwide (except for Hubei Province) is expected to be in the middle and late March. Therefore, inventory continues to accumulate, and social inventory is expected to return to the magnitude of 2 million tons.

In addition to the delay in the recovery of domestic consumption, the situation overseas is not optimistic. In recent two weeks, the epidemic has spread rapidly overseas, with South Korea, Japan, Italy and Iran as the most serious ones. Iran, as the producer of electrolytic aluminum, has not heard the news of production reduction. However, South Korea, Japan and Italy are all consumer countries. Although the above-mentioned countries have not yet taken measures to shut down production and have little direct impact on aluminum consumption, the three countries are developed countries with important economic status. Japan and South Korea are the core countries of the global automobile manufacturing industry and semiconductor industry supply chain, and Italy is also one of the largest economies in Europe. Therefore, the spread of the epidemic will have a negative impact on the economy, aluminum consumption and the number of export orders.

Shortage of raw material supply

In addition to the demand side, the epidemic also has a significant impact on alumina production. Since the outbreak of the epidemic, due to the impact of traffic control and the postponement of mine construction, many alumina plants in Shanxi and Henan are in short supply of raw materials, forcing them to reduce or reduce production. At present, the output level of pressure reduction is as high as 5.8 million tons. Even though the import volume continues to increase, the domestic alumina supply and demand still turns to the shortage situation. With the continuous improvement of traffic in the near future, the problem of raw material supply has been alleviated, and the production capacity of some aluminum plants has been restored, but the overall situation is still not significantly improved, so it needs to wait for the comprehensive lifting of traffic ban.

On the whole, domestic supply is strong and demand is weak, and the cost side is supported. Although the demand gradually picks up in March, the inventory is in a situation of continuous accumulation, the domestic aluminum price rebound power is insufficient, and the future market will be in a low level oscillation. If the epidemic continues to spread and there are more and more affected areas, the inventory accumulation will further expand, and the domestic aluminum price will fall to 12500 yuan / ton, corresponding to the price of lunlu aluminum at 1600 US dollars / ton.

1、 Price data

According to the price monitoring of the business agency, the market price of refined oil fell in February. At the end of the month, the price of gasoline was 6154 yuan / ton, 8.02% lower than 6691 yuan / ton at the beginning of the month. At the end of the month, the price of diesel was 6056 yuan / ton, 1.75% lower than 6164 yuan / ton at the beginning of the month.

2、 Analysis of influencing factors

Product: affected by the Chinese epidemic situation in February, the demand of refined oil market dropped precipitously. In the late ten days, with the increase of enterprises returning to work, the refined oil market rebounded slightly, but the overall refined oil market was in a downward trend.

Industry chain: affected by the epidemic situation in China at the beginning of this month, domestic refineries reduced their operating rates, and domestic crude oil market demand fell sharply. Three major institutions, OPEC, EIA and IEA, simultaneously reduced the growth rate of global crude oil demand this year. In the late ten days, the new crown epidemic in other regions of the world, such as the Middle East and Europe, had a trend of spreading. The spread of globalization worried the market about future economic development. The price of international crude oil market is declining.

Market: affected by the epidemic situation in China, the demand of domestic refined oil market dropped precipitously, and the market price kept decreasing in the first ten days of February. In terms of gasoline, due to the high inventory of refineries, the lack of large orders and other favorable factors in the market, as well as the delay in the resumption of work of various enterprises, the gasoline price continued to decline. In terms of diesel, although the increase in the operating rate of coal mines, warehouses and other enterprises has provided good results to some extent, the performance of the demand side has not met expectations, and the market trading has weakened again at the end of February. In February, the refined oil product was depressed by the demand side, and the market price kept falling.

3、 Future forecast

Lu Xingjun, an oil product analyst with business association, believes that the new crown epidemic has a trend of continuous spread abroad, which will depress the price of the international crude oil market. At the same time, domestic enterprises will return to work step by step. The market demand for oil products cannot reach the previous position in one step. It is expected that the market price of oil products will continue to run at a low level, or have a small rebound.

1、 Price trend

The domestic toluene market fell slightly this week, down 0.6% on last week as of Friday, according to the data in the business club’s bulk list.

2、 Analysis and comment

1. Product: due to the continuous spread of the epidemic and fear of the impact of the shrinking demand for crude oil, the international crude oil price fell sharply this week, and the price of toluene in the Korean market fell sharply. Although domestic enterprises gradually entered the resumption period, and the market demand gradually improved, the domestic toluene price still followed the decline. At present, the mainstream price in East China is about 4950 yuan / ton.

2. Industrial chain:

Upstream, in terms of crude oil, international oil prices fell sharply this week. As of Friday, spot Brent fell 10.76%, Brent futures fell 10.92%, WTI futures fell 11.41%, and Dubai futures fell 10.27%.

On the downstream side, TDI, at present, toluene TDI’s external offer is about USD 615 / T FOB ARA, and domestic goods with bills are quoted with reference to RMB 10500-11000 / T. due to the slow recovery of downstream demand, it is expected that the TDI market will stop falling and stabilize next week. In the PX market, Sinopec’s companies were listed at about 6300 yuan / ton this week, with the latest price of about 670 US dollars / ton FOB South Korea and 688 US dollars / ton CFR China. It is expected that the PX market price will stop falling and stabilize next week.

3、 Future forecast

Toluene analyst of business and chemical branch said: next week, we will continue to focus on the trend of crude oil and the progress of downstream enterprises’ resumption. On the whole, it is expected that the price of isomeric xylene in the international crude oil market and South Korean market will stop falling and recover next week. In addition, domestic enterprises will gradually enter the resumption period, and the market demand will gradually improve. Under the expectation, the price of toluene in the domestic market next week will be in shock and rebound trend.

1、 Overall trend

On February 28, the LLDPE commodity index was 65.28, unchanged from yesterday, down 44.47% from 117.56, the highest point in the cycle (December 11, 2013), and up 0.99% from 64.64, the lowest point on February 19, 2020. (Note: cycle refers to 2011-09-01 to now)

The LDPE commodity index on February 28 was 58.85, unchanged from yesterday, 48.07% lower than 113.33 (2013-12-08), the highest point in the cycle, and 1.00% higher than 58.27, the lowest point on February 19, 2020. (Note: cycle refers to 2011-09-01 to now)

On February 28, the HDPE commodity index was 59.84, unchanged from yesterday, down 41.52% from 102.33 (2014-07-24), the highest point in the cycle, and up 3.26% from 57.95, the lowest point on February 24, 2020. (Note: cycle refers to 2011-09-01 to now)

2、 Market analysis

On February 28, the polyethylene market continued to be weak, showing a trend of horizontal consolidation, in which the average price of LDPE 2426h in East China monitored by the business association was about 7526.5 yuan / ton; the average price of HDPE 5000S was about 7383.33 yuan / ton; the average price of LLDPE 7042 was about 6816.67 yuan / ton. As of February 28, the prices of LLDPE, LDPE and HDPE in East China were stable. International crude oil continued to decline, with a large range. On the 28th, the market reported a decline, and the overall trading atmosphere was still weak. The futures market fell, and the international crude oil continued to decline, petrochemical inventory rose slightly, and the strength of the on-site supply cost was average. Business delivery is not smooth, small margin shipping based.

Upstream: international oil prices fell for the fifth day in a row on February 27 (Thursday), hitting the lowest level in more than a year. Oil distribution fell to a new low since late December 2018, and US crude oil continued to brush its 13-month low to US $47.84, continuing to dominate the oil market due to concerns about the slowing economy and demand. Light crude oil for April delivery on the New York Mercantile Exchange fell $1.64, or 3.37%, to $47.09 a barrel as of February 27. London Brent crude oil futures for April delivery fell $1.25, or 2.77%, to $52.18 a barrel.

Futures trend: according to the monitoring of business club, on February 28, the opening price of main contracts of l1905 polyethylene futures was 8635, the highest price was 8635, the lowest price was 8555, the closing price was 8580, the former settlement price was 8655, the settlement price was 8590, down 75, down 0.87%, the volume was 222262, the position was 413566, and the daily increase was – 2846. (quotation unit: yuan / ton)

3、 Future forecast

International oil price continues to be weak, cost support is limited, downstream factories return to work slowly, more on-demand procurement, market entry atmosphere is relatively light, it is expected to continue to be weak in the near future.

Commodity index: on February 26, the polyaluminium chloride commodity index was 105.41, unchanged from yesterday, 3.30% lower than the highest point of 109.01 (2019-08-28) in the cycle, and 4.47% higher than the lowest point of 100.90 on December 19, 2019. (Note: cycle refers to 2019-04-01 till now)

Quotation: according to the monitoring data of business agency (100ppi. Com), the mainstream market quotation of polyaluminium chloride (fixed, content ≥ 28%) in early February 2020 is about 1833.33 yuan / ton, and the mainstream market quotation on the 26th is 1833.33 yuan / ton, which is stable. In February, the main quotation scope of domestic market of polyaluminium chloride was mainly concentrated in: the quotation of solid polyaluminium chloride (industrial grade, content ≥ 28%) with tax was about 1800-2200 yuan / ton, the quotation of liquid (industrial grade, content 10% – 12%) with tax was about 400-450 yuan / ton, some manufacturers just returned to work and delivered goods, because of the increase of raw material cost, the quotation of polyaluminium ex factory was increased by 50 yuan / ton.

Upstream: from the middle of January 2020 to now, after the Spring Festival holiday and delayed resumption of work, the domestic market hydrochloric acid price is stable. According to the data of the business agency, the mixed price of hydrochloric acid in Shandong Province for 31min from February 17 to 24 was 236.67 yuan / ton, down 1.39%, 186.87% higher than the same period last year, and the downstream purchase volume and hydrochloric acid supply are normal.

Downstream: during the Spring Festival, the construction of water treatment project is stopped, and there is basically no purchase order; at present, the construction units start to resume work one after another, and the demand will gradually improve.

Manufacturer: Gongyi factory, the main production area of Henan Province, received the notice on December 19, 2019 to stop production continuously. It is reported that the factory has just returned to work since the end of last week, and some manufacturers only returned to work but did not resume production. The demand accumulated in the early stage has been delivered successively. As the transportation system is gradually recovering, the manufacturer’s delivery will be normal.

Industry:

1. In late July 2019, recently, the water purification and environmental protection enterprises in Yong’an Road sub district office of Gongyi City, Henan Province received the notice of production suspension, which requires: according to the analysis of the city’s environmental pollution status and future pollution weather, the municipal office requires all deep treatment enterprises to stop production before acceptance, and can resume production after scheduling or acceptance according to the office.

2. After resumption of production, the production will be stopped again: the production will be resumed for ten days in August, and it will be stopped again on 15th. According to the manufacturer, the production stop is more affected by the National Games held in Zhengzhou on September 8th. The local environmental protection inspection is strict, and all local enterprises in Gongyi are required to stop production for environmental protection treatment and maintenance.

3. After the National Games on September 8, the local manufacturers did not receive the notice of commencement immediately, and the strict inspection of environmental protection was in progress. In late September, local manufacturers in Gongyi began to resume production one after another, and the supply of goods gradually returned to normal.

4. On December 19, Gongyi, the main production area of Henan Province, issued an emergency notice, requiring all enterprises to stop production and all goods transportation from now until January 1, 2020 in accordance with the spirit of the 16th scheduling meeting of Gongyi City for environmental pollution control. Zhengzhou municipal leaders will lead the supervision group to continuously supervise and inspect the implementation of management and control. If it is found that the implementation is not in place, the person in charge of the enterprise and the truck driver will be detained. The enterprise will be included in the blacklist of integrity, and the enterprise will be subject to top-level punishment. This notice is very strict for manufacturers and freight requirements, and manufacturers should stop production.

5. During the period from January Spring Festival holiday to February 20, relevant enterprises in the main production area stopped production and delayed resumption of work. After 20 days, manufacturers in the main production area returned to work one after another, and some of them have returned to work.

Aftermarket forecast: according to the analysis of the business community, under the current situation, the review and approval of the construction unit’s resumption of work is strict. With the gradual progress of the review and approval of the resumption of work in various regions, the demand for polyaluminium chloride in various regions will increase, the current transportation system is also gradually recovering, and the delivery will increase. The current supply of goods for the manufacturers is sufficient. Most of the water treatment enterprises in the main production area of Henan Province have resumed production and some have resumed production without shortage of goods. The upstream hydrochloric acid market is slightly reduced, and the enterprises’ resumption of work is gradually increased, and the downstream demand will turn from weak to warm.