Stimulated by the supply disturbance in Guinea, the center of gravity of operation of Shanghai aluminum has moved up slightly again in the near future, and the current main contract price is hovering around 19,300 yuan/ton. With the gradual release of bullish sentiment, under the background of the temporary stability of domestic electrolytic aluminum supply and the weakening of downstream consumption, it is expected that the upward space of Shanghai aluminum market is limited.
Ore shortage and environmental protection policy restrict alumina production
According to SMM data show that as of the end of November, China's metallurgical grade alumina built capacity of 100 million tons, operating capacity of 82.07 million tons, the national operating rate of 82.1%. From January to November this year, China's cumulative production of metallurgical grade alumina reached 73.095 million tons, an increase of 2.46%.
Into December, on December 21, Binzhou region issued the "Notice on the start of Heavy Pollution Weather II Emergency Response", which is expected to reduce the production of roaster in the local alumina plant from December 22, 2023 to January 4, 2024, involving a production capacity of about 7.5 million tons/year. The short-term spot shortage, the cargoes have adopted the strategy of holding up the price, and the downstream is still worried about the long order guarantee. However, Shandong environmental protection limited production has not affected the supply of long orders. At the same time, affected by the supply of roasted gas, some aluminum oxide plants in Shanxi and Henan have reduced their roasted production recently, with a total annual capacity of 1.2 million tons. Last week, a roaster in a large aluminum oxide plant in Shandong was scheduled for routine maintenance, which is expected to affect the cycle of 15 days, involving an annual capacity of about 300,000 tons. SMM expects average daily production in December to be 223,000 tons/day, with a total operating capacity of around 81.5 million tons, up 6.6% year on year. Henan Sanmenxia, Guangxi, Guizhou and other places due to ore stress pressure, there is no plan to resume production. In 2023, Hebei Wenfeng Section 3 and 4, and Tiandong Jinxin Chemical Phase 2 were put into operation smoothly, and tight balance was maintained throughout the year.
From January to November this year, the cumulative domestic electrolytic aluminum production was 37.946 million tons, an increase of 3.6%. Among them, electrolytic aluminum production in November was 3.488 million tons, an increase of 4.6%, and a decline of 4.2% from the previous month. The main reason for the quarter-on-quarter decline is that the electrolytic aluminum industry has significantly reduced production due to the limited power supply in Yunnan. As of the end of November, SMM statistics of domestic electrolytic aluminum built capacity of about 45.19 million tons, domestic electrolytic aluminum operating capacity of about 41.89 million tons, the industry operating rate fell 2.4% to 92.7%.
In December, there is still a small amount of new production capacity in China, and the remaining new production capacity in Baiyinhua, Inner Mongolia has been completed, but some electrolytic cell production has not yet reached production, and it is expected to take some time to fully reach production. Yunnan region operating capacity is still higher than the historical high in the same period. In December, the domestic electrolytic aluminum operating capacity remained stable in the short term. Combined with capacity changes, SMM expects domestic electrolytic aluminum production in December to be about 3.56 million tons, an increase of 3.5%, and electrolytic aluminum production in 2023 is expected to reach 41.5 million tons, an increase of 3.6%.
From the perspective of electrolytic aluminum imports, from January to November, China's cumulative net imports of electrolytic aluminum were 1.2317 million tons, an increase of 2.97 times year-on-year. Among them, the net import of electrolytic aluminum in November was 172,400 tons, an increase of 59.24%. Affected by the lower cost of overseas electrolytic aluminum, the loss margin of domestic electrolytic aluminum imports in 2023 was narrowed compared with that in 2022, and the import profit window was reopened in mid-August and lasted until October. During this period, considerable import profits stimulated a surge in net imports of electrolytic aluminum in the fourth quarter. At the same time, European and American sanctions on Rusal have deepened the structural contradictions in the global supply of aluminum ingots, and China's imports of Russian aluminum have increased. From January to November, Russian aluminum imports were 1.0553 million tons, accounting for 77.2% of China's total imports. This year, Russian aluminum imports are mostly based on long orders. Under the influence of the overseas smelter director's order, the net import of aluminum ingot will be maintained in the later period.
Domestic electrolytic aluminum social inventory continued to warehouse
After mid-November, domestic electrolytic aluminum inventory ushered in the turning point of storage, and the speed of storage slightly exceeded expectations. After the opening of the import window, the inflow of imported goods increased, but the interference to the storage was insufficient. The impetus to promote the domestic aluminum ingots to storage mainly comes from two aspects. On the one hand, the impact of Yunnan's production reduction on the arrival of aluminum ingot is still continuing; On the other hand, the cooling and snowfall weather has a greater impact on the transportation efficiency, and the arrival of domestic aluminum ingots is delayed, resulting in a reduction in the amount of aluminum ingots in storage. As of December 25, the domestic electrolytic aluminum social inventory was 443,000 tons, a decrease of 27,000 tons from the previous week, and a decline of 41,000 tons from the same period last year. In view of the faster storage in early December, it is expected that electrolytic aluminum inventories will slowly fall to near 400,000 tons by the end of the year.
The cost of electrolytic aluminum fluctuates in a narrow range
Since the beginning of this year, the focus of the total cost of domestic electrolytic aluminum has moved down, and corporate profits have rebounded. According to SMM data, as of December 22, 2023, the total cost of domestic electrolytic aluminum was 16,301.82 yuan/ton, down 1762.6 yuan/ton from the same period last year. From the perspective of industry profits, as of December 22, 2023, the profit level of the domestic electrolytic aluminum industry was 2818.18 yuan/ton, an increase of 2062.6 yuan/ton over the same period last year, and industry profits showed a rebound trend. In the short term, the raw materials market is weak, but the short-term reduction of power costs is difficult, and the cost of domestic electrolytic aluminum will mainly fluctuate in a narrow range. At the same time, there is a large gap between the power sources of electrolytic aluminum enterprises in the north and the south, and the cost differentiation is obvious, and the cost advantage of electrolytic aluminum enterprises in the north is more prominent.
The automobile market continues its high growth momentum
After the domestic car market harvested a full of gold, nine and ten silver, in November with the help of the "double 11" promotion and other consumption waves, the demand for car purchases continued to be released. November auto production and sales hit a record high in recent years. From the production and sales data, the automobile production and sales in November respectively completed 3.093 million and 2.97 million, an increase of 7% and 4.1%, respectively, an increase of 29.4% and 27.4% year-on-year. In addition to the "carry-over" factors at the end of the year, the increase is also related to the low base of the same period last year. From January to November this year, China's automobile production and sales totaled 27.111 million and 26.938 million, an increase of 10% and 10.8%, respectively.
New energy vehicles, as a bright spot in the automotive industry, also continue to maintain a momentum of rapid progress. In November, the production and sales of new energy vehicles in China exceeded one million for the first time, with production and sales of 1,074,000 and 1,026,000, respectively, with year-on-year increases of 39.2% and 30%, respectively. From January to November this year, the total production and sales of new energy vehicles completed 8.426 million and 8.304 million, an increase of 34.5% and 36.7%, respectively, and the market share reached 30.8%.
In the combination of policy effects continue to appear, local auto shows and promotional activities continue to force, and enterprises in December facing the end of the sprint pressure under the background, the auto market in December continued to improve, this year's auto production and sales are also expected to hit a record high. The CAAM forecasts that China will sell 27.6 million vehicles this year, up about 3 percent year on year. About 9 million new energy vehicles were sold, up 30% year-on-year. According to the forecast of the International Aluminum Association, the amount of aluminum used by new energy vehicles in 2021-2025 will increase year by year, and the amount of aluminum used by new energy vehicles in 2023-2025 will reach 0.20/0.21/0.23 tons respectively. It is estimated that the amount of aluminum used in China's new energy vehicles in 2023 will be 1.8 million tons.
Shanghai Aluminum upside limited
On the macro side, the domestic macro side released good news, and the central bank proposed to increase counter-cyclical and cross-cyclical adjustment. Us inflation continues to cool, and with interest rate hikes coming to an end, the market is now raising expectations for the Federal Reserve to cut interest rates in early 2024. On the basic level, the supply side, the current domestic electrolytic aluminum supply is stable, Yunnan and other regions are not expected to change the new capacity, it is expected that by the end of December, the Inner Mongolia Baiyinhua project is all power completed and put into operation. Later, we should pay attention to the power supply in southwest China. On the demand side, the operating rate of domestic aluminum downstream processing leading enterprises last week was down 0.1% from the previous week to 63.1%, down 0.8% year-on-year. At the end of the year, most enterprises began to withdraw funds for settlement, and the willingness to replenish the inventory declined in the off-season of consumption. Later electrolytic aluminum inventory will gradually slow down, but the inventory is at a low level in the year and the same period in history, and the support for aluminum prices still exists. From the plate point of view, the main contract of Shanghai aluminum is still facing strong pressure near 19400 yuan/ton, and it is expected that the upside space is limited, and the risk of a high correction in the later stage is to be cautious of the support level below 18820 yuan/ton.
(www.profiles-aluminum.com; sales@profiles-aluminum.com).
