On the supply side, the output of domestic bauxite mines is maintained due to the impact of environmental protection, and the export of overseas Guinea mines is operating normally. Power supply in Yunnan has been relaxed compared with the same period in previous years, local electrolytic aluminum enterprises have begun to resume production work, and it is expected to resume production of 500,000-700,000 tons of capacity in March, and the domestic supply side as a whole has a small growth, but the growth rate is limited.
On the demand side, The State Council recently issued the "Action Plan for promoting large-scale equipment renewal and replacing old consumer goods with new ones", proposing four major actions such as replacing old consumer goods with new ones, recycling and recycling, and supporting home appliances and automobile sales enterprises to jointly produce enterprises and recycling enterprises to carry out trade-in promotional activities. In addition to the consumption side, we will also push forward the upgrading of infrastructure construction, focusing on key industries such as steel, nonferrous metals, petrochemicals, chemicals, building materials, electricity, machinery, aviation, shipping, textile and electronics, and vigorously promote the upgrading and technological upgrading of production equipment, energy-using equipment, and transmission, transmission and distribution equipment. All kinds of old for new has a significant boost to aluminum demand, demand side policy support is expected to aluminum annual consumption growth more than expected at the beginning of the year.
In the case of limited growth on the supply side and exceeding expectations on the demand side, aluminum prices are expected to show a strong trend in the future. Domestic main contract reference operating range: 18,500 yuan - 19,500 yuan. Overseas reference operating range: $2150 - $2350.
Supply side: Domestic bauxite production remains low
On the supply side, the output of domestic bauxite mines is affected by environmental protection, and the space for increasing production is limited. According to SMM data, domestic bauxite production in January 2024 (31 days) was 4,482,300 tons, an increase of 2% from the previous month and a decrease of 12.17% year-on-year. Shanxi, Henan province, bauxite production to maintain production status, domestic bauxite supply continues to be tight, especially in the Shanxi and Henan areas the most serious, in January, Shanxi bauxite production decreased 29.75%, Henan bauxite production decreased 21.09%. Although the current alumina plant profits are considerable, but the restriction of bauxite supply makes it difficult for the local alumina plant to achieve the production increase target. In terms of overseas bauxite, the supply of Guinea remains stable at this stage, and the subsequent resumption of production in Yunnan is expected to further increase the supply and proportion of overseas bauxite.
Supply side: The resumption of production in Yunnan is progressing steadily
In terms of electrolytic aluminum, according to the latest research and understanding of SMM, the outgoing power supply in Yunnan Province has declined recently, and the provincial wind, light and other power supply is better, and there is a surplus of power in the province. The Yunnan provincial government and relevant departments encourage industrial electricity consumption, and after the provincial special class meeting decided that the province will release 800,000 kilowatts of load power for the provincial electrolytic aluminum enterprises to resume production in the near future. Equivalent to electrolytic aluminum annual production capacity of about 520,000 tons. As Yunnan enters the wet season, the subsequent electrolytic aluminum production capacity is further loosened, which will also drive the subsequent increase in alumina demand.
In terms of inventory, as of March 18, aluminum ingots accumulated to 892,000 tons, and aluminum rods went to 269,000 tons. At this stage, aluminum ingot inventory is still at a relatively low level, aluminum rod inventory has begun to steadily go to storage after reaching a high level, and aluminum rod processing fees have not been affected by high inventory, and the overall stability has been maintained. It is worth noting that in January-February 2024, unwrought rolled aluminum and aluminum imports of 720,000 tons, compared with 550,600 tons in the same period last year, a cumulative increase of 77.3%. Among them, about 380,000 tons were imported in January, a new high since December 2021. According to Aladdin's calculation, the number of imported aluminum ingots in January and February is about 450-500,000 tons, in the case of more than expected growth in the number of imports, the total social inventory of domestic aluminum ingots and aluminum rods is still relatively low, and shows a downward trend, which also reflects the strong downstream demand for domestic aluminum from the side.
Demand side: The operating rate remains relatively high
In terms of downstream operating rate, the operating rate of aluminum rods has reached the highest level in the same period of previous years after the epidemic, and the demand pull brought about by the transformation of the national grid has a significant pull gain on the demand for aluminum rods. The operating rate of aluminum plate and foil is also at a historical high. On the whole, except for aluminum profiles, which have been weakened by the real estate downturn, the demand for the rest of the plate is at a historically high level, and the overall downstream construction is relatively good.
Demand side: Trade-in to stimulate potential demand
On March 7, 2024, The State Council issued a notice on the "Action Plan for Promoting large-scale equipment Renewal and replacing old consumer goods with new ones", which proposed four major actions such as replacing old consumer goods with new ones, recycling and recycling, and supported home appliance and automobile sales enterprises to jointly produce enterprises and recycling enterprises to carry out trade-in promotional activities. The service life cycle of household appliances and automobiles has reached a relative replacement period from the peak of the last wave, so in the case of sufficient policy stimulus in various places, we can expect the growth of related consumption to exceed expectations.
Brief summary
On the supply side, the output of domestic bauxite mines is maintained due to the impact of environmental protection, and the export of overseas Guinea mines is operating normally. Power supply in Yunnan has been relaxed compared with the same period in previous years, local electrolytic aluminum enterprises have begun to resume production work, and it is expected to resume production of 500,000-700,000 tons of capacity in March, and the domestic supply side as a whole has a small growth, but the growth rate is limited.
On the demand side, The State Council recently issued the "Action Plan for promoting large-scale equipment renewal and replacing old consumer goods with new ones", proposing four major actions such as replacing old consumer goods with new ones, recycling and recycling, and supporting home appliances and automobile sales enterprises to jointly produce enterprises and recycling enterprises to carry out trade-in promotional activities. In addition to the consumption side, we will also push forward the upgrading of infrastructure construction, focusing on key industries such as steel, nonferrous metals, petrochemicals, chemicals, building materials, electricity, machinery, aviation, shipping, textile and electronics, and vigorously promote the upgrading and technological upgrading of production equipment, energy-using equipment, and transmission, transmission and distribution equipment. All kinds of old for new has a significant boost to aluminum demand, demand side policy support is expected to aluminum annual consumption growth more than expected at the beginning of the year.
In the case of limited growth on the supply side and exceeding expectations on the demand side, aluminum prices are expected to show a strong trend in the future. Domestic main contract reference operating range: 18,500 yuan - 19,500 yuan. Overseas reference operating range: $2150 - $2350.
