The aluminum price fluctuated widely

According to the data of SunSirs, the average price of domestic aluminum ingots in the East China market on February 24, 2023 was 18,486.67 RMB/ton, down 2.60% from the aluminum price of 18,980 RMB/ton at the beginning of the month (February 1). After the aluminum price recovered in January, it fell in mid-February.

In the long term, the price has retreated significantly, with an increase of 5.94% compared with the average market price of aluminum ingot of 1,7450 RMB/ton at the beginning of the recent recovery (July 14, 2022). Compared with the recent high aluminum price (the average market price of aluminum ingots was 19,536.67 RMB/ton on December 5), the decline was 5.37%.

Overview of fundamentals

1. Domestic capacity changes and expectations

Guizhou: Due to low temperature power limitation, the electrolytic aluminum production capacity of 580,000 tons is currently in operation (1.63 million tons had been built), and is expected to recover to 900,000 tons by March;

Sichuan: 1.07 million tons of electrolytic aluminum capacity will be restored to 75% by March;

Guangxi: recently launched incentives for the resumption of electrolytic aluminum production capacity;

Inner Mongolia: Baiyinhua project may run 200,000 tons of electrolytic aluminum capacity in March

Guizhou: The first phase of the new electrolytic aluminum production capacity of Guizhou Yuanhao had been put into production of 20,000 tons/year

Gansu: Gansu Zhongrui's 192,000 electrolytic aluminum production capacity may be fully put into operation in March;

Yunnan: the electrolytic aluminum capacity in normal operation was 5.2 million tons, and the electrolytic aluminum capacity in normal operation may be reduced again by 67-80 million tons after being reduced to 4 million tons due to water and electricity shortage, and the electrolytic aluminum capacity that had been cut down may be recovered in the rainy season from May to June 2023;

According to the news, Nanshan Aluminum planed to transfer 336,000 tons of electrolytic aluminum production capacity index and had transferred 100,000 tons to Guizhou Huaren and 136,000 tons to Guizhou Xingren.

2. Inventory data

As of February 23, the domestic mainstream social inventory was 1.238 million tons, an increase of 162,000 million tons compared with 1.076 million tons at the beginning of the month (February 2). The factory's inventory dropped from 269,000 tons on February 2 to 174,000 tons on February 23. The total inventory increased by 67,000 tons in the month.

On February 23, LME aluminum inventory data was updated, with a total reduction of 5,225 tons. Most of the decrease came from the warehouse in Bahrain and Singapore. The warehouse in Klang had been reduced by 3,850 tons; 1,300 tons of warehouses had been reduced in Singapore; In addition, Detroit reduced by 75 tons. There was no data fluctuation in other warehouses.

Market outlook

On the supply side, the recent production reduction in Yunnan had been implemented, and the production reduction capacity was slightly higher than expected, and the positive expectation in the early stage wa gradually digested. From the inventory data, the downstream consumption had improved, the operating rate of processing enterprises had rebounded significantly, but it was less than expected, the social inventory of electrolytic aluminum had increased slightly, and it was still in the trend of inventory accumulation, and the downstream aluminum rods were still destocking. In the short term, electrolytic aluminum will also be suppressed by macro factors. It is expected that the operation will be mainly weaker and attentions should be paid to the downstream consumption in the future.

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