SunSirs: Annual Report of Aluminum which Rose 7.77% in 2019

Review of Aluminum Ingot Spot Market in 2019

1. Domestic spot price trend in 2019

In 2018, the aluminum price bottomed out, and throughout 2019, the overall domestic aluminum price trend is upward. According to the data of business society, as of December 30, 2019, the average price of domestic standard aluminum ingot Market is 14,520RMB/ton, which is 13,473.33RMB/ton compared with the average price of the market at the beginning of the year (January 1), with an increase of 7.77% in the year.

2. Brief introduction of domestic spot market by stages in 2019

Specifically, the annual spot aluminum ingot price trend is divided into seven stages:

The first stage: from January to the first ten days of February (before the lunar year), the downward market started in September 2018 was continued. The low price of aluminum ingots fluctuated, with the operating range of 13,250-13,500, and the operation of the low-level segment of the interval was the main one. The average market price on January 15 was 13,223.33RMB/ton, which was the valley value of the year. At this stage, the domestic aluminum price has touched the industry's average cash cost line, and the operating pressure of some enterprises is close to the limit. The domestic aluminum industry began to start independent capacity removal. It is reported that in 2018, the capacity of electrolytic aluminum shut down in China has exceeded 3.2 million tons per year, of which about 80% shut down is concentrated in the second half of the year.

The second stage: from the middle of February to the beginning of June, after the Spring Festival, the consumption of domestic aluminum ingots has improved. The market feedback that the demand side is good and the production capacity in the high cost area is reduced and the backward production capacity is eliminated initiatively begins to appear, supplemented by the information side bonus. For example, the Sino US trade negotiation is good, the domestic financial and monetary stimulus policies are frequent, and the market atmosphere is warmer.

However, in this stage, the main factor driving the price rise of aluminum ingots is the cost factor. In May, xijiaokou Xinfa and Xiaoyi Huaqing all stopped production due to red mud problems, and alumina raw materials were in short supply in China. The price suddenly rose to 3,200, and the cost factor greatly pushed up the market price of aluminum ingots.

The third stage: from the beginning of June to the end of July, the aluminum oxide in the early stage rose sharply, obviously exceeding the bearing capacity of the downstream aluminum ingot manufacturers. The market gradually has price and no market, and just needs a small amount of procurement. After that, foreign Hyderabad resumed production, alumina import window opened, alumina market no longer, cost support no longer, superimposed peak season is not prosperous and the off-season is reduced, aluminum price quickly spit back the previous increase. According to the data of business agency, the average market price of aluminum ingots on July 3 was 13,646.. 67RMB/ton, a decrease of 5.06% compared with the average market price of aluminum ingots on May 27 of 14,373.33RMB/ton.

The fourth stage: from the beginning of August to the first ten days of September, about 1.5 million tons of operating capacity of Weiqiao in Shandong Province and Xinxing Xinfa in Xinjiang were reduced due to floods and electrolytic cell leakage accidents, respectively. The operating capacity of ABA aluminum plant in Sichuan Province and Guyang electrolytic aluminum plant in Inner Mongolia was also reduced due to accidents. The domestic operating aluminum capacity was greatly reduced, the social inventory was obviously moved down, the superimposed consumption was in the peak season, and the effects of both sides of supply and demand were overlapped Plus, push aluminum prices up rapidly. According to the data of business agency, on September 13, the average market price of aluminum ingots was 14,563.33RMB/ton, and the price of domestic spot aluminum ingots rose to 14,500 for the first time in 2019.

The fifth stage: from late September to mid October, the aluminum price trend is good, and the industry's profit holding level continues to improve. In the early stage, the replacement capacity and new capacity are put into production, and some of the production capacity has also begun to resume production, especially in the southwest and inner Mongolia regions, where the aluminum capacity is received, with frequent news, and the aluminum ingot price under pressure.

The sixth stage: from late October to early December, the price of aluminum ingots continued to fluctuate in the first line of 14,000, with supply and demand basically balanced, and the multi empty game intensified. On the one hand, the social inventory moved down significantly, and the supply was tight, on the other hand, the market expected more production capacity.

The seventh stage: in late December, since December 16, the price of aluminum ingots has ushered in the third wave of small rise in the year. According to the data of business agency, the average market price of aluminum ingots on December 26 is 14600RMB/ton, the peak value in 2019, and the price of domestic spot aluminum ingots is 14,500 for the second time in 2019.

Analysis of Electrolytic Aluminum Industry Chain

1. Overview of the upstream and downstream of electrolytic aluminum industry chain

It is reported that alumina and coal power account for about 80% of the cost of electrolytic aluminum. According to historical data and industry experience, alumina price is about 17.8% of electrolytic aluminum price.

2. Price trend of electrolytic aluminum industry chain products in 2019

(1) Price trend of aluminum and power coal in 2019

(2) Price trend of aluminum and aluminum fluoride in 2019

(3) Price trend of aluminum and cryolite in 2019

(4) Price trend of aluminum and caustic soda (related to alumina production) in 2019

The price of electrolytic aluminum in 2019 has little correlation with the price of auxiliary materials, and the factors that have a large impact on the price are mainly reflected in the price change of raw aluminum oxide and the factors of supply and demand.

3. Expected increase of alumina production

The most upstream bauxite supply, Australia, China, Guinea, Brazil and India account for 86.3% of global production. In recent years, the supply of domestic bauxite is relatively tight due to environmental protection problems, but overseas bauxite is rich in energy and has a large window for import.

In 2019, the annual capacity of alumina is expected to increase by about 2.5 million tons. In 2020, 6.2 million tons of new capacity is expected to be put into operation. At present, the capacity under construction in China is up to more than 10 million tons.

Data List of Supply and Demand over the years

1. Supply and demand data of electrolytic aluminum in recent 7 years

In the past seven years, the domestic production of electrolytic aluminum increased first and then decreased, mainly due to the supply side reform of policy (2018) and the independent capacity reduction of the industry (2019). In 2018-2019, the aluminum plant was shut down and replaced. In the second half of 2019, due to unexpected shutdown, the supply end shrank significantly. It is expected that the output in 2019 will decrease by 1.5-1.6%. At present, the social inventory of electrolytic aluminum in China continues to move down significantly, and it is expected to decrease by 580,000-590,000 tons in 2019.

2. The growth of production and consumption of electrolytic aluminum in the past 7 years

The data shows that the supply and demand of electrolytic aluminum are weak in recent two years, the domestic market is basically balanced, and the spot pressure is not big.

Expectation of electrolytic aluminum in 2020

1. Policy: favorable tariff

Since January 1, 2020, 107 items of goods, such as ferrochrome, will continue to be subject to export duties. The export tax rate or provisional export tax rate will be applied. The scope and tax rate of the goods will remain unchanged (see the official website of the Ministry of Finance for details). According to table 4, the tax rate of electrolytic aluminum and its downstream products has been greatly reduced.

2. Demand side may pick up

The recovery of domestic automobile industry and real estate industry will drive downstream aluminum consumption, and the overall supply pattern is expected to be better in China. In addition, aluminum for consumer goods industry and ultra-high pressure aluminum will become the growth point in 2020.

To sum up, electrolytic aluminum market will continue to recover in the near future in 2020, and the price operation range is expected to be 14,000-15,000RMB/ton in the year.

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