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Positive factors support Shanghai aluminum prices to fall limited space

February 28, 2024
Since the beginning of January this year, the downstream demand is expected to weaken, the domestic electrolytic aluminum social inventory has gradually accumulated, and the Shanghai aluminum price shock is weak, but with the appearance of multiple factors, the Shanghai aluminum price decline space or limited.
Consumer inflation rebounded
Do not change the Fed rate cut expectations
Us January CPI and core CPI annual rate of 3.1% and 3.9%, PPI and core PPI annual rate of 0.9% and 2%, respectively, are higher than expected, production and consumption inflation rebound, so that the Federal Reserve to cut interest rates at the latest to July. With January retail sales and industrial output at -0.8 percent and -0.1 percent, construction permits and housing starts at 1.47 million and 1.331 million, respectively, both below expectations and previous readings, and commercial real estate loan problems likely to trigger another crisis in small and medium-sized banks, several Fed officials insisted that the Fed would start cutting interest rates in the summer. And the year or three interest rate cuts, the market expects the Federal Reserve to cut interest rates in June.
Considering that the consumer end inflation in the United States in February or continued to rebound, the Federal Reserve may need to observe the consumer end inflation for three consecutive months before opening interest rate cuts, the author believes that the Federal Reserve's interest rate cuts within the year or will support the price of non-ferrous metals.
Domestic electrolytic aluminum social inventory
Limited room for growth
Back in China, Shanxi Province ordered Luliang Jinming Mining and Chinalco Yangjiashan aluminum mine to suspend production for rectification after several mining accidents since late October. Due to the requirement of reclamation, the mining of Sanmenxia bauxite is limited, which makes the supply of Henan bauxite tight and the price is high. In Guizhou and Guangxi, individual mine production is blocked, supply is tight, and prices are rising, which makes Chinese enterprises actively seek to import bauxite. Internationally, considering that the rainy season in Queensland, Australia from January to March may affect the production of bauxite, Guinea and Australian bauxite are dominated by chief executive officer, prompting prices to remain stable or rise, which will support the price of alumina and electrolytic aluminum from the production cost.
As of February 7, Henan bauxite supply is tight and alumina capacity operating rate remains low, the import bauxite supplement increases the alumina capacity operating rate in Shanxi, the easing of bauxite supply tension significantly increases the alumina capacity operating rate in Guangxi, and the weekly alumina capacity operating rate in Shandong has also increased, promoting the weekly alumina capacity operating rate in China to increase from the previous month. The theoretical production cost of alumina rose to more than 2730 yuan/ton.
Inner Mongolia Baiyinhua 200,000 tons of electrolytic aluminum production capacity has reached full production in the fourth quarter of last year, Yunnan region due to the dry period of electricity production reduced by 1.17 million tons of electrolytic aluminum production capacity is still to be resumed.
The import window is closed or China's electrolytic aluminum imports are limited, or the domestic electrolytic aluminum social inventory space is gradually limited.
Policies for steady economic growth
Promote downstream demand recovery
China's social financing scale and new yuan loans in January were 6.500 billion yuan and 4.92 billion yuan respectively, both higher than expected and the previous value. In addition, the domestic central bank is still expected to cut interest rates, and the downstream resumption of production after the Spring Festival holiday may gradually increase the weekly capacity of China's electrolytic aluminum downstream processing enterprises.
From a specific point of view, with the domestic local governments actively introduce real estate stimulus policies, commercial banks to launch real estate project loan whitelist and the weather is warming, real estate construction gradually resumed, it is expected that the construction profile production capacity will gradually rebound.
The acceleration of national UHV construction has enabled most leading aluminum cable companies to maintain normal production, with finished product inventory mainly produced in February, and centralized delivery orders began in March. As small and medium-sized aluminum cable enterprises gradually resume work and production, it is expected that the operating rate of aluminum cable capacity will also rise.
In January, domestic new energy vehicle sales are good, last year's low base or will support the marginal growth rate of sales in the first half of this year, while most large aluminum plate and foil enterprises have maintained continuous production, or will support the demand for aluminum plate and foil. However, the growth rate of demand for battery aluminum foil this year may be lower than the growth rate of supply, or compress profits and promote the industry reshuffle.
Most of the original aluminum alloy is used in the production of automobile parts such as wheels, and the good sales of automobiles make most of the original aluminum alloy enterprises maintain stable production. With the resumption of production of waste aluminum recycling enterprises, it is expected that the procurement of raw materials for recycled aluminum alloy plants will be relatively easy, and thus increase their capacity.
In summary, under the support of the Federal Reserve's summer interest rate cut expectation, domestic stable growth policy, tight bauxite supply and other factors, Shanghai aluminum prices are gradually limited.
(www.profiles-aluminum.com; sales@profiles-aluminum.com).