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Aluminium industry weekly review(03.03.2023)

Author : Kyle Peng

Update time : 2023-03-06 13:05:22

Market review

After Yunnan's production reduction is in place, the impact on production will gradually appear, and consumption will continue to improve marginally, providing bottom support for aluminum prices. However, the terminal consumption in the aluminum market still needs to be improved, and real estate consumption has not yet stabilized. Although there are disturbances on the supply side, the turning point of inventory is still unclear. Aluminum prices continue to strengthen, feedback on the substantial improvement in demand and consumption, and it is difficult to have a trending market for the time being. Aluminum prices continue to fluctuate this week.

【Futures market】

The main contract of Shanghai Aluminum 2303 has increased by 0.75% this week. The initial price of this cycle is 18,570 yuan/ton, the end price is 18,775 yuan/ton, the highest price is 18,795 yuan/ton, and the lowest price is 18,320 yuan/ton.

【Spot market】

At the beginning of the week, the market was not very active, and the downstream was a little wait-and-see, mainly purchasing on demand, and middlemen were also cautious in accepting goods. However, some holders are reluctant to sell at a higher price because the local supply is slightly tight. With the stabilization of aluminum prices, the rise in prices has stimulated the enthusiasm for purchasing in the market, the trading activity of traders has rebounded, and the number of recipients has increased.

News of the week

1. On February 28, local time, LME issued Announcement No. 23/034, immediately suspending any new LME registered warehouse receipts for Russian primary aluminum, copper, lead, nickel or aluminum alloys. This regulation applies to LME listings stored in the United States storehouse. There is little Russian metal in US warehouses, the impact is limited, and there are no changes to delivery rules outside the US. There are currently no registered warehouse receipts for Russian primary aluminum, copper, lead and nickel in LME US warehouses. Rusal currently stored in LME US warehouses (for North American special aluminum alloy contracts) is 400 tons. U.S. tariffs won't change its stance on Russian metals. (London Metal Exchange).

2. According to data, from February 1 to 19, the passenger car market retailed 730,000 units, a year-on-year increase of 16% and a year-on-year decrease of 9%. The national passenger car new energy vehicle market retailed 215,000 units, a year-on-year increase of 43% and a year-on-year decrease of 4%.

3. China's official manufacturing PMI in February was 52.6, a new high since April 2012; Caixin manufacturing PMI was 51.6, and business confidence rose to a 23-month high.

Fundamentals

1. Import profits

As of March 2, 2023, the closing price of LME aluminum is 2,395.5 US dollars / ton; the closing price of the main aluminum contract in Shanghai is 18,650 yuan / ton, and the import price is 1,025.58 yuan / ton. The import inversion increased by 389 yuan/ton compared with last week.

2. Cost and profit per ton of aluminum

Under the fermentation of the mine accident in Inner Mongolia last week, the coal price in the main domestic producing areas bottomed out and rebounded across the board. In the short term, the impact of the accident may cause other mines to be inspected accordingly, thereby affecting production or shipments. Overall, it will support thermal power prices. In addition, the price of alumina has temporarily stabilized, and the price of anodes has continued to weaken. At present, the average cost of domestic electrolytic aluminum enterprises has dropped to around 17,300 yuan/ton, and profits have further rebounded. But on the whole, the main problem facing domestic aluminum companies is not the profit problem, but even if the aluminum factories are given high profits, the reduction in supply still cannot be recovered quickly. In addition, the U.S. tax on Rusal has been implemented, and it is expected that overseas countries will need to give China a higher premium to import aluminum or aluminum ingots.

3. Downstream start-up gradually picks up

In the week of February 23, the operating rate of aluminum profiles was 58%, which was flat week-on-week; the operating rate of aluminum strips was 77.8%, +0.8 percentage points week-on-week; the operating rate of aluminum foil was 82.1%, +1.7 percentage points week-on-week; the operating rate of aluminum materials was 61.8% %, week-to-week ratio of +0.3 percentage points. After the festival, the downstream construction gradually resumed, but the current real estate sales transactions still have no obvious improvement. Developers are still in short supply of funds, and it is difficult to collect payments, which will restrict the subsequent start of construction.

4. Inventory

1. As of March 2, 2023, the LME aluminum inventory was 546,825 tons, a decrease of 16,775 tons from the previous week, and the canceled warehouse receipts accounted for 19.76%.

2. As of March 2, 2023, the total social inventory of electrolytic aluminum was 1.204 million tons, a decrease of 9,000 tons from the previous week; 50,000 tons in Shanghai, 433,000 tons in Wuxi, 48,000 tons in Hangzhou, and 313,000 tons in Foshan tons, 56,000 tons in Tianjin, 3,000 tons in Shenyang, 222,000 tons in Gongyi, and 11,000 tons in Chongqing.

3. As of March 3, 2023, the electrolytic aluminum inventory of the Shanghai Futures Exchange was 302,599 tons, an increase of 6,679 tons from the previous week.

summary

China's February manufacturing PMI performance exceeded expectations, which boosted market sentiment, and demand recovery expectations are still strong. However, judging from the actual situation, the current consumption performance is relatively average, and consumption continues to improve marginally, but real estate sales transactions have not improved significantly, and developers are still in short supply of funds, which will restrict the subsequent start of construction, and focus on the sustainability of demand. On the supply side, the resumption of electrolytic aluminum production in Sichuan, Guizhou and other places is relatively slow, and the reduction in production in Yunnan will gradually affect production. Before the power shortage problem is alleviated, supply-side disturbances may continue to exist, giving aluminum prices some support. The short-term aluminum price is still in a range-bound operation, and follow-up attention will be paid to the improvement of domestic micro-demand and the progress of overseas interest rate hikes.

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Aluminium industry weekly review(03.03.2023)