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Analysis of the resumption of aluminum industry and the trend of aluminum prices under the influence

2020-02-20

SMM News: On the first day of market opening in 2020, due to the negative impact of the epidemic, Shanghai Aluminum's main contract in 2003 expanded by the mood-driven shock interval, with a low of 13,510 yuan / ton, a new low of nearly a year. Subsequently, the shock continued, but with the large inventory accumulation and the delay in the resumption of business, what is the demand for aluminum? What is the trend of aluminum prices? On February 7th, SMM held a WeChat group live broadcast event. SMM analysts conducted various investigations on the industry chain from the cost-side alumina and electrolytic aluminum inventory to aluminum processing and downstream companies' resumption time. Corresponding analysis, the minutes of this meeting are collated and shared with you.


Alumina

 The epidemic seriously affects the alumina plant's raw materials entering the plant and the delivery of finished products


1. The supply of raw materials mainly affects the main raw materials of ore, caustic soda, ash and coal.


1) In terms of ore, domestic mines are hindered by steam transportation and civilian mining has not yet started. Therefore, some inland alumina plants in Henan and Shanxi, especially those without their own mines and those mainly producing high temperature lines, cannot The timely replenishment of the stockpiles resulted in a relatively low level of domestic ore stocks; imported ore actually has less pressure in arriving at the port. At present, ports can normally unload the port without ensuring crew changes, and Guinea ’s rainy season ends with crude oil to suppress shipping Fees have fallen and arrivals are expected to increase. However, due to the shortage of short-shipment transportation, the resistance to sparse port is relatively large, which currently affects the level of imported ore stocks of individual alumina plants in Inner Mongolia and Shanxi.


2) In terms of caustic soda and ash, we understand that the difficulty in shipping the caustic soda plant has led to inefficient inter-provincial procurement and transportation of the alumina plant in Henan and Shanxi, affecting their inventory levels; for some alumina plants in Shandong, the impact is small because It is near the main place of production of caustic soda, and the transportation in the city is basically normal. In addition, some Henan enterprises had to suspend the plan to purchase lime from Hubei, and the inventory was tight.


3) In terms of coal, most of the coal mines in Shanxi and Shaanxi will resume production after February 9th, and there will be greater pressure on coal transportation in the port. We understand that there are currently 3 large alumina companies in Shandong and Shanxi due to the shortage of coal supply. Suspend or plan to suspend some roasting capacity.


Second, the epidemic situation also has a relatively serious serious impact on the alumina shipment. At present, railway shipments are basically normal, but the rate is far less than that of automobile shipments.


Auto transport has been greatly affected. There are two main points. First, multi-ship auto transport shipments need to be reported in advance, and the local leadership team will uniformly plan the dispatch plan. Second, there are fewer available vehicles and on-site drivers. Proactive price increase but logistics difficult to find. Therefore, the low shipping efficiency has caused some companies to increase their own inventory compared to before the holiday.


In terms of different regions, the alumina plants in the northern region have been severely affected by the current epidemic situation. At present, there are already alumina plants in Shanxi and Shandong that have reduced their production due to tight raw material inventory. 10,000 tons, the extension of the Spring Festival holiday may lead to a further increase in the risk of alumina production reduction. The production capacity of alumina in Southwest China is basically the same as that at the end of January, and the impact of the epidemic is relatively small. The stock levels of various raw materials can ensure the current production. Some Chongqing and Guizhou enterprises have slow delivery of alumina, so the finished product inventory has increased compared with the previous period. SMM estimates that in February (29 days) metallurgical grade alumina production will be 5.118 million tons, and the average daily output of metallurgical grade will drop to 176,000 tons.

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 ▍Alumina price forecast


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According to the calculation of production volume and net import volume, the current domestic alumina supply performance is slightly excessive, and the actual production reduction scale of domestic alumina plants is not large. Therefore, the buyers and sellers are hesitant to quote, and the degree of influence on subsequent logistics remains uncertain.


At the beginning of the week, spot transactions were mainly based on demand and the scale was small, but according to SMM, due to the uneven supply situation in the current domestic alumina market, the supply side is tight but the demand side is tight. Therefore, SMM believes that in the short term, it is affected by logistics factors. Under the situation of rising purchase demand from some electrolytic aluminum plants, the spot price of alumina may rebound in the past two weeks. The rebound height and sustainability need to pay attention to changes in logistics policies and reduce alumina production. The impact of scale and inventory levels of electrolytic aluminum plants.

Electrolytic aluminum

As far as production is concerned, as far as we know, although some electrolytic aluminum companies are currently experiencing tight raw material inventory, they can maintain normal production after actively increasing procurement costs, asking for help from the society, and government scheduling, and the new production rate has not been affected by the epidemic The impact has slowed significantly. However, there is still a shortage of coal in electrolytic aluminum plants, so it is necessary to continue to pay attention to the impact of transportation.


According to some electrolytic aluminum companies in Xinjiang and Inner Mongolia, we have stated that after the holiday is extended, the original aluminum water consumption ratio will continue to remain low during the holiday and the amount of ingot will increase. This will cause the overall supply of aluminum ingot to remain high for a period of time. The amount of aluminum ingots at the consumer sites will continue to increase, and the inventory level of the overall consumer sites is expected to continue to rise.


 ▍In stock


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As of February 6, SMM's statistics on the domestic electrolytic aluminum social inventory reached 945,000 tons, an increase of 255,000 tons from the previous Spring Festival, an increase of 36.96%. In addition to the impact of the epidemic, which extends the Spring Festival holiday by about 3 days, the arrival of aluminum ingots during the Spring Festival holiday this year is the highest year-on-year increase in the past five years. About 200,000 to 1.2 million tons.


At present, the raw material inventory of electrolytic aluminum plants is lower than before the holiday, and the procurement and related transportation costs are higher than before the holiday. At the same time, the downstream processing enterprises of the aluminum factory have light demand. Under the pressure of both ends, aluminum enterprises are under greater financial pressure. As of Friday, due to the negative price of aluminum and the slight increase in the prices of raw materials such as alumina and prebaked anodes, SMM has calculated that the instant earnings of domestic electrolytic aluminum have fluctuated at a high level of around 1,000 yuan before the correction, shrinking to 394.88 yuan / ton.


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Aluminum: The outbreak has a more direct impact on downstream consumption. First of all, from the perspective of time, it is mainly reflected in the long-term and short-term aspects. In the short-term, the epidemic situation directly led to the extended vacation of downstream aluminum processing enterprises.


According to SMM surveys, in terms of aluminum processing, Henan aluminum plate and foil companies, Guangdong aluminum profile companies, and aluminum processing companies in Jiangsu and Zhejiang extended the Spring Festival holiday by at least 7-10 days, and some provinces extended the holiday time by more than 14 days. After 3 days, the procurement of spot aluminum ingots by downstream processing companies was weak, and overall electrolytic aluminum consumption was postponed.


In the long run, the impact of the epidemic on the end market will be indirectly transmitted to the orders of electrolytic aluminum processing enterprises. These areas involve real estate, automobiles, electricity, home appliances and other aluminum-intensive sectors. Within or will be transmitted to the consumption of primary aluminum.



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 From the perspective of aluminum processing product segmentation:


Aluminum profiles: Most domestic profile companies are currently in shutdown, but there are still a small number of Chinese New Year holidays that continue to produce. According to the SMM survey, starting from next Monday (February 10), profile companies will gradually rework and resume production, but there are three problems: 1. Regional policy issues, and the epidemic situation in different provinces and cities varies, which makes There are differences in the government's requirements for the resumption of business, and some regional profile companies may be pushed to mid-to-late. The specific time must wait for the local government's notification; 2. Staff issues, especially profile companies with a large proportion of foreign employees, are facing return trips and subsequent The quarantine and observation period will be very tedious, and the company will not be able to achieve the ideal production status after starting the project. 3, logistics problems, some areas with severe epidemics, transportation is almost stagnant, vehicles and people are limited, including aluminum ingots / aluminum bars and other raw materials and finished products Access is affected.


In addition, in terms of terminals, real estate and other building material demand areas are most affected. Construction site construction projects in some areas are not allowed throughout February, while photovoltaic and other industrial materials areas are relatively less affected. In terms of raw materials, aluminum rod companies still maintain a certain level of operating rate during the holidays. Strict isolation measures are implemented in the industrial areas, and the impact of the epidemic is limited. The problems they face are similar to those of profile companies, that is, the return trip of foreign employees and the outward product Transport dilemma. In general, in the short term, the epidemic will continue to affect terminal demand, the supply and demand of intermediate processing companies will have difficulties at both ends, and the price of raw materials will also be under certain pressure.


 So from the perspective of the market segment, first of all, the strip foil:


Some large enterprises in Henan and Jiangsu did not completely stop production during the holiday period, and other companies will postpone the work until the 10th. Due to the high base price of aluminum years ago, the level of raw material inventory in the factory was not high, and the pressure on finished product inventory of most enterprises was relatively high; however, there were also some state-owned enterprises that had less pressure on their own inventory because of clearing inventory before the year; in terms of orders, domestic customers Construction also started after the 10th. Some companies stated that export orders were stable year-on-year, but the current trucking to ports was affected. It is expected that strip and foil companies will try to get out of the downturn and start construction in late February.


Aluminum poles and cables: First of all, in terms of inventory, the cable industry has less raw material inventory, and companies tend to maintain value. Orders are signed for half a year, so finished product inventory will not be too high according to the order. Enterprises are basically on the Chinese New Year holiday and resume work after the 10th, because there are many state-owned enterprise customers, their return to work is also after the 10th. In terms of aluminum rods, because aluminum water is used as the raw material, the aluminum rod factory does not have raw material inventory, and the finished product inventory is also very small. The independent aluminum rod factory is closed during the Spring Festival and will not be produced until the 10th. If the aluminum rod workshop of the electrolytic aluminum factory will reduce production during the Spring Festival, there will also be finished product inventory for sales after the year. According to the SMM survey, basically all companies that are on vacation during the Spring Festival are uncertain about the specific resumption time after the year, which may be prolonged, so the market sentiment is pessimistic.


Profiles and aluminum rods: Most domestic profile companies are currently in shutdown, but a small number of Chinese New Year holidays continue to produce. According to the SMM survey, starting from next Monday (February 10), profile companies will gradually rework and resume production, but there are three problems: 1. Regional policy issues, and the epidemic situation in different provinces and cities varies, which makes There are differences in the government's requirements for the resumption of business, and some regional profile companies may be pushed to mid-to-late. The specific time must wait for the local government's notification; 2. Staff issues, especially profile companies with a large proportion of foreign employees, are facing return trips and subsequent The quarantine and observation period will be very tedious, and the company will not be able to achieve the ideal production status after starting the project. 3, logistics problems, some areas with severe epidemics, transportation is almost stagnant, vehicles and people are limited, including aluminum ingots / aluminum bars and other raw materials and finished products Access is affected.


In addition, in terms of terminals, real estate and other building material demand areas are most affected. Construction site construction projects in some areas are not allowed throughout February, while photovoltaic and other industrial materials areas are relatively less affected. In terms of raw materials, aluminum rod companies still maintain a certain level of operating rate during the holidays. Strict isolation measures are implemented in the industrial areas, and the impact of the epidemic is limited. The problems they face are similar to those of profile companies, that is, the return trip of foreign employees and the outward product Transport dilemma. In general, in the short term, the epidemic will continue to affect terminal demand, the supply and demand of intermediate processing companies will have difficulties at both ends, and the price of raw materials will also be under certain pressure.


Recycled alloys: At present, domestic secondary aluminum companies have no special political tasks, and will resume work on February 10 or even later. According to SMM research, due to the lack of workers and low raw material inventory, secondary aluminum companies may maintain a low operating rate until early March. In terms of raw materials, domestic waste aluminum supply was tight before and after the Spring Festival in previous years. This year ’s tension has continued to increase due to the epidemic situation. Imported waste aluminum has no pressure on arrival and unloading at the port, but it is also difficult to find auto logistics because it is facing Certain difficulties in port clearance. On the downstream side, except for manufacturers with special production tasks, most automakers will also start construction after the holidays. The raw material inventory level of the automakers has not been high, and automakers also started to decline in February due to epidemic problems. Regarding the price of recycled aluminum alloy ingots in the market outlook, we believe that the premium caused by the shortage of scrap aluminum has previously been expected to decline significantly after the mid-season. However, due to the outbreak of the epidemic, the base price of aluminum stabilized after a period of decline. The epidemic formed difficulties in transportation and scrap aluminum recovery, and formed a certain support for the price of scrap aluminum. In addition, after the epidemic situation has eased at the end of February, secondary aluminum companies may usher in a wave of centralized production supplements. It is expected that the price of secondary aluminum will fall slightly and stabilize under the impact of the epidemic. In the future, we still need to pay attention to the severity of the epidemic. Impact of downstream operations.


Primary alloys: At present, the operating rate of primary alloy companies is relatively low. Some large enterprises in the southwest and northwestern regions have suspended production due to shipping difficulties and fewer downstream orders, or only half of them have been started. According to SMM investigation, the raw material inventory of the primary alloy plant is less affected by the epidemic situation. Although silicon transportation is a problem, the amount is small and the manufacturer's inventory is sufficient. In the downstream aspect, more wheel hub factories resume work on February 10-14, and the manufacturers' wheel hub exports. Facing certain problems, it is difficult to order cargo ships, and major exporting countries currently have restrictions on Chinese exports, such as the United States and Southeast Asian countries. It is expected that the start of primary alloy enterprises will return to normal in March. It is necessary to continue to pay attention to the epidemic trend and downstream trends.



Aluminum price outlook

On the spot side, starting from Monday, spot markets in East China, Guangdong and other places have begun trading, but the trading activity is significantly weaker than in the same period of previous years, which is related to the delay of short-term aluminum processing companies' holidays and the poor delivery of existing social warehouses. In terms of Shanghai Aluminum in the last issue, despite the cancellation of night trading, Shanghai Aluminum opened a major opening of 13,600 yuan / ton on Monday, a sharp drop of 500 yuan / ton from the close of the holiday, a drop of 3.55%; the first half of the week maintained a low sideways attitude. Short positions began to lighten on Thursday, and Shanghai Aluminum attempted a slight upward move. As of the day's closing on Friday, Shanghai Aluminum's main stock closed at 13,725 yuan / ton. The disk structure also changed from the back structure that was maintained for a long time before the festival to contango.


Therefore, in general, the inventory accumulation mentioned above and the market's concerns about the consumption of primary aluminum are concentrated on the disk. In the short term, the impact of the epidemic will continue, downstream start-ups will be delayed, and slow resumption of work will lead to short-term oversupply, and the social aluminum ingot inventory will increase more than expected. The original supply pressure was released ahead of time, and the profit of electrolytic aluminum was retreated. Therefore, under the premise that the above-mentioned negative points are not well released, the short-term aluminum price may maintain a low operating trend, and the pressure at the Wansi crossing will be greater. In the medium term, the maintenance of the contango structure and whether to return to the back structure also need to pay attention to the change in mentality of long shorts regarding the recovery of downstream consumption and the risk of transmitting upstream supply shortages.