Abstract: on the one hand, the overseas epidemic situation is complex and has not seen a stable situation, 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 situation of continuous accumulation, aluminum prices will maintain low oscillations.
With the recent outbreak of the overseas epidemic, global financial markets are in panic and aluminum prices have fallen sharply. At present, the domestic epidemic situation is basically under control, and various localities are resuming work and production in an active and orderly manner. It is optimistically estimated that they can return to the normal production level in mid-March, but due to the complexity of the overseas epidemic situation and the lack of a stable situation for the time being, it is expected that it will have an impact on aluminum consumption, and aluminum prices will easily fall but not rise in the future.
The upward trend of production capacity remains unchanged.
As the profit level of electrolytic aluminum smelting continues to be high in 2019, the smelting capacity has been rising since the fourth quarter, and both new investment and resumption production capacity have contributed. The rising trend of supply in 2020 has not changed, and the new production capacity in the first quarter is mainly concentrated in the southwest region, including Yunnan Aluminum Heqing Phase II, Yunnan Shenhuo Phase I New Year's Day began to put into production before and after, and Guangyuan Zhongfu's new production capacity continued to be put into operation. In addition to new production, resumption of production before energy saving is also more positive, Qinghai, Xinjiang, Inner Mongolia and other places early due to accidents or losses to take the initiative to reduce production capacity are resuming production. However, affected by the epidemic, some new projects and resumption plans have to slow down the progress. In addition, the resumption of production capacity in Xinjiang, Inner Mongolia, Gu, Hubei and other places has also slowed down or shelved the resumption plan due to the epidemic.
According to statistics, the operating capacity of electrolytic aluminum in China was 37.22 million tons at the end of February, an increase of 580000 tons over the end of 2019. Although the epidemic has affected some production capacity plans, it is estimated that the capacity increase caused by new investment and resumption of production in March will still be 100000-200000 tons. Therefore, the rising trend of electrolytic aluminum production capacity remains unchanged.
The impact of overseas epidemic should not be underestimated.
Unlike the small impact on the supply side, the demand side is significantly affected by the epidemic. As of Feb. 27, the national aluminum social inventory (aluminum ingots + aluminum bars) was 1.623 million tons, an increase of 829000 tons compared with that before the Spring Festival, while due to inconvenient transportation, the inventory in the plant was also nearly 440000 tons, which shows that the accumulation range is much higher than expected.
As the epidemic has been gradually brought under control, production has been resumed in various parts of the country recently, but the progress of resumption is relatively slow due to the need for quarantine of returning staff and the fact that inter-regional transportation has not yet been fully restored. As of this week, the operating rate of the aluminum processing industry is expected to be about 50%, and it is optimistically estimated that the full resumption of work across the country (except Hubei Province) is expected in mid-late March. As a result, inventories continued to accumulate and social stocks returned to the order of 2 million tons.
Apart from the delay in the recovery of domestic consumption, the overseas situation is not optimistic. The epidemic has spread rapidly overseas in the past two weeks, with South Korea, Japan, Italy and Iran being the most serious. Iran, as a producer of electrolytic aluminum, has not yet heard of the production reduction. However, South Korea, Japan and Italy are all consumer countries, although these countries have not yet taken measures to stop production, and the direct impact of aluminum consumption is relatively small, but the three countries are all developed countries with important economic status. Japan and South Korea are the core countries of the global automobile manufacturing and semiconductor industry supply chain, and Italy is also one of the largest economies in Europe. Therefore, the impact of the spread of the epidemic on the economy can not be underestimated, will have a negative impact on aluminum consumption, and then on the number of export orders in China will also have a negative impact.
Shortage of raw material supply.
In addition to the demand side, the epidemic situation also has a significant impact on alumina production. Since the outbreak of the epidemic, affected by traffic control and delayed mine construction, many alumina plants in Shanxi and Henan have been in short supply of raw materials, forcing them to reduce production or pressure production. at present, the reduced pressure production is as high as more than 5.8 million tons. even if the import volume continues to increase, domestic alumina supply and demand still turn to the shortage situation. With the recent continuous improvement in traffic, the problem of raw material supply has been alleviated, and the production capacity of some aluminum plants has been restored, but the overall situation has not improved significantly, so we need to wait for the full lifting of the traffic ban.
Overall, the domestic supply and demand is weak, the cost side has support, although the need for a gradual pick-up in March, but inventory is in a situation of continuous accumulation, the domestic aluminum price rebound power is insufficient, the future will be in a low oscillation. If the epidemic continues to spread and more and more affected areas are affected, the degree of inventory accumulation will further expand, and the domestic aluminum price will fall to 12500 yuan / ton, corresponding to the Lun aluminum price of 1600 US dollars / ton.
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(author: Yuefeng Aluminum Technology)