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
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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
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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.
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