On August 2, Yunnan Aluminum Co., Ltd. and Shenhuo Co., Ltd. replied to the recovery of electrolytic aluminum production capacity in Yunnan Province on the investor platform. Among them, Yunnan Aluminum Co., Ltd. said that the company is promoting the resumption of electrolytic aluminum production according to the water and power supply dispatching situation in Yunnan Province; Shenhuo Co., Ltd. also said that its subsidiary Yunnan Shenhuo is steadily resuming production according to the established plan.
"Since the end of June, Yunnan hydropower generation has increased significantly, and Yunnan Province has entered the water season, the future hydropower supply expectations are more optimistic, the province has opened the electricity load of electrolytic aluminum enterprises, and accelerated the resumption of production of electrolytic aluminum enterprises in the province," said Li Jiahui, aluminum analyst at Shanghai Metals Network. According to SMM's preliminary calculation, the current domestic electrolytic aluminum operating capacity has jumped to around 41.92 million tons, close to the historic high of 42 million tons at the end of July.
With the improvement of supply and demand in the aluminum industry, according to the calculation of Fang Fuqiang, an analyst of China International Trade Futures Research Institute, the profit of domestic electrolytic aluminum is high. By the end of July, the complete cost of domestic electrolytic aluminum is about 16,000 yuan/ton, and the profit of corresponding electrolytic aluminum enterprises reaches 2,500 yuan/ton. The profitability of aluminum smelting enterprises in the third quarter may be better.
Increase in supply of electrolytic aluminium
According to the data of the press conference held by the Yunnan Provincial Government Information Office on July 10, Yunnan has formed a capacity of 5.8 million tons of electrolytic aluminum, accounting for more than 12% of the total capacity of the country. The industrial chain is accelerating and the cluster development is showing a good trend. In 2022, green aluminum will achieve an output value of 85.6 billion yuan, which has become an important new growth pole of Yunnan's industrial economy; in the first five months of this year, it will achieve an output value of 31.186 billion yuan, which is expected to become a new 100 billion yuan industry.
At present, the capacity of electrolytic aluminum in Yunnan Province is accelerating the recovery. According to Aladdin data, from January to April 2023, the output of electrolytic aluminum in Yunnan Province was 1.748 million tons, up 9.8% year on year. According to the latest research information of SMM, most electrolytic aluminum enterprises in Yunnan Province are steadily resuming production, and the progress of resumption of production is pleasing. At present, the work of opening troughs in some enterprises has been basically completed, and the total scale of resumption of production in Yunnan Province has reached 1.3 million tons, among which the scale of resumption of production has exceeded 1.04 million tons since July.
SMM expects domestic electrolytic aluminum output to rise 1.14% year-on-year to around 3.54 million tons in July. If enterprises continue to resume production in August and reach production as scheduled, domestic electrolytic aluminum SMM expects domestic electrolytic aluminum output to rise 1.14% year-on-year to around 3.54 million tons in July. If enterprises continue to resume production in August and reach production as scheduled, domestic electrolytic aluminum operating capacity may reach more than 4.25 million tons.
Including the investment and construction capacity of Yunnan Aluminum Co., LTD., Shenhuo Co., LTD., Yunnan Hongtai, Yunnan Honghe and Yunnan Qiya and other large aluminum enterprises, a number of electrolytic aluminum projects have been landed in Yunnan Province. Since 2018, the electrolytic aluminum capacity of the above aluminum enterprises has achieved "leap"; at present, the electrolytic aluminum capacity of Yunnan Aluminum Co., LTD has exceeded 3 million tons; Yunnan Hongtai is a key transfer project of Shandong Weiqiao Electrolytic aluminum, which has a planned annual primary aluminum capacity of 2.03 million tons, and has put into production capacity of more than 1 million tons.
According to the research report of CITIC Construction, the current domestic electrolytic aluminum investment and construction capacity is close to the ceiling of 45 million tons, and more stock replacement will be in the future. Since 2023, the utilization of electrolytic aluminum capacity has remained above 90%, and the non-production part has been repeatedly disturbed by hydropower.
Aluminum earnings expected to improve in third quarter
Entering 2023, due to the continuous downturn of aluminum prices and the general rise in the purchase price of raw materials, the earnings of aluminum enterprises in the first half of the year were generally under pressure. According to the performance forecast released by Hong Kong-listed China Hongqiao on July 28, the company's expected net profit in the first half of this year decreased by about 70% compared with the same period last year.
"Recently, the global inventory of electrolytic aluminum is at a historical low, and it is expected that the supply and demand relationship of electrolytic aluminum industry will continue to improve in a long period. With the price of electrolytic aluminum raw materials falling and the cost falling, the profit of electrolytic aluminum industry in the third quarter may improve," an industry insider said to Securities Daily.
From the supply side, Yao Xin, aluminum analyst at the aluminum business department of Shanghai Steel Association, told Securities Daily: "Mysteel judged that the theoretical supply shortage of 66,000 tons in July 2023, based on the overall supply, demand, social stocks and factory warehouses of aluminum ingots and rods, and the gap between supply and demand expanded slightly month-on-month. From the seasonal point of view, the subsequent gap between supply and demand will continue to narrow or appear an inflection point, but the overall balance of supply and demand still supports the maintenance of a certain profit level of electrolytic aluminum."
From the demand side, Zhang Liming, aluminum industry analyst at SMM, said that the operating rate of leading domestic aluminum downstream processing enterprises last week (as of July 29) rose 0.6 percentage points to 63.4%. Under the support of favorable macro policies, the consumption of real estate, automobiles and other related From the demand side, Zhang Liming, aluminum industry analyst at SMM, said that the operating rate of leading domestic aluminum downstream processing enterprises last week (as of July 29) rose 0.6 percentage points to 63.4%. Under the support of favorable macro policies, the consumption of real estate, automobiles and other related industries gradually recovered, driving the operating rate of aluminum downstream enterprises to rise again after five weeks, but some sectors are still in the consumption season, the short-term recovery expectations are low, and the impact of subsequent policies still needs to be further observed and tracked.
Yao Xin also said: "On the one hand, the resumption of aluminum rod production, driving the month-on-month improvement trend of aluminum rod capacity will continue in the short term; on the other hand, in terms of profile demand, the decline trend of building profile orders and output has stabilized, and the recovery of photovoltaic orders has also contributed to the improvement of production line operating rate of aluminum profile enterprises. The overall demand in July has stabilized month-on-month."
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