Aluminum prices fluctuated up in August, up 0.65% this week

The average spot market price of aluminum ingots fluctuated at a high level in mid-to-early August, and the operating range was 19,700-20,100 yuan/ton, with a monthly increase of 1.02%.

On August 13, the average price of domestic aluminum ingots in the East China market was RMB 2,060/ton, which was an increase of 0.65% from the average market price of 19,930 RMB/ton at the beginning of the week. During the week, it fell first and then rose, and the overall operation fluctuated.

Based on the average market price of aluminum ingots at the beginning of the year (January 1, 2021) of 15,726.67 yuan/ton as the benchmark price, it has now increased by 27.55%.

The main theme of the supply side: increasing the proportion of electricity and production restrictions

The proportion of restricted production in Yunnan has increased, and Guangxi, Guizhou, and Inner Mongolia have also entered the ranks of restricted production. The new production capacity is expected to be lowered to less than 1.3 million tons during the year. At the end of July, Yunnan Shenhuo announced that the production limit was upgraded from 25% to 30%, and 35 units were once again forced to stop. The cumulative total stop was 145 units, and the operating capacity was reduced to 550,000 tons. At the beginning of August, Yun Aluminum was not spared. The production shutdown was similar to that of Shenhuo. The aluminum plant shutdown ratio reached 30%, and the operating capacity fell to 1.87 million tons.

Expected factors: It is difficult to resume production in Guangxi and Yunnan in September. It is expected that the supply and demand of electricity during the flood season will be basically balanced in the second half of 2021, and the supply may be insufficient in some periods. Electricity and electricity are expected to still be short in November-December. At the end of the year, Yunnan entered the dry season again, and the restart of the electrolytic aluminum tank was costly. In order to avoid frequent switching, it is expected that the Yunnan electrolytic aluminum plant will not be able to resume production on a large scale from September to October.

Downstream processing companies are also affected

In early August, some aluminum processing enterprises in Zhengzhou and Luoyang, Henan Province received a notice from the Electric Power Bureau in their jurisdictions that large industrial enterprises may limit power to 50% depending on the situation, and all industrial enterprises below ten kilovolts will stop production, which is expected to last for three weeks or more.

The weekly operating rate of leading aluminum processing companies fell by 0.6% to 67.8%, and Henan's peak power cuts once again led to a weaker operating rate. In terms of aluminum material category, aluminum sheet, strip and foil companies have cut production due to insufficient power supply. At the same time, due to the Zhengzhou epidemic, transportation has been blocked, and the willingness of foreign vehicles to go to the epidemic area is extremely low.

From the perspective of the social inventory of aluminum ingots, the downstream is relatively unaffected, and the overall supply is tight.

Outlook is expected

August is in the off-season, and domestic demand is expected to slow down, posing a certain downside risk to aluminum prices. However, the cost and power curtailment have led to a reduction in production capacity, and the current market inventory is low, which supports aluminum prices.

The current price range of 19500-20500 yuan/ton is a steady-state shock range formed by market games. It is expected that the price of aluminum ingots will continue to be mainly around 199,000 yuan/ton in the near future. On the whole, the short-term downside risk is weakened, and the main operation is still maintained at a high level.

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