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SunSirs: Chinese Aluminum Prices Lead Base Metals to Rise in May, Can the Loss Caused by COVID-19 be Covered in June?

June 03 2020 09:26:37     SunSirs (Linda)

1. Aluminum market trends

According to SunSirs data, as of May 29, the average domestic aluminum ingot market price was 13,476.67 yuan/ton, compared with the beginning of the month (May 1), the average market price was 12,813.33 yuan/ton, an increase of 5.18%; compared with the beginning of April, the average market price is 11,526.67 yuan/ton, an increase of 16.92%.

2. The rise in aluminum prices in May led the basic metal sector

According to SunSirs price monitoring, in May 2020, there were a total of 17 commodities in the colored sector in the commodity price rise and fall list, including 5 commodities with an increase of more than 5%, accounting for 22.7% of the monitored commodities in this sector; The top 3 increased commodities are silver (15.57%), dysprosium oxide (8.68%), dysprosium iron alloy (7.04%). Among them, in the basic metal sector, aluminum rose first, with the increase in the order of aluminum (5.18%), tin (3.20%), lead (2.91%), copper (2.63%), zinc (0.26%), and nickel monthly The worst performance was 0.43%.

The rise in aluminum prices in May led the base metal sector, on the one hand, it was based on the fact that during the early panic decline of the non-ferrous sector, aluminum prices fell deeper, ranking second in the base metal sector, after copper. The vacancies hit by the decline are deeper, and there is more room for retaliatory rebound. The rise in April was relatively low. The aluminum price accelerated rebound in May. As of May 29, the relative magnitude of aluminum price rebound ranked third in the basic metal sector, lagging behind. Yu tin, lead.

According to SunSirs data, with the beginning of the year (January 1) as the benchmark price, in the down tide, the deepest decline order is copper (-24.93%), aluminum (-22.79%), zinc (-20.36%), nickel ( -18.66%), tin (-15.09%), lead (-13.09%). As of May 29, the closest to the benchmark price order is tin (-1.80%), lead (-4.67%), aluminum (-7.40%), zinc (-9.09%), copper (-9.60%), nickel ( -11.40%).

The rebound of non-ferrous sector prices reflects that the manufacturing economy has gradually recovered with the comprehensive resumption of domestic production and resumption of production from April to May. The supply and demand index (BCI) was 0.37, with an average increase of 4.45%. The increase in the BCI value indicates that the manufacturing economy is expanding compared with the previous month.

Domestic electrolytic aluminum supply and demand data also confirms the above view.

1) The output is not reduced and the inventory is obviously removed

In April 2020, China's electrolytic aluminum output was 2.958 million tons, an increase of 2.4% year-on-year. From January to April, the cumulative domestic production of electrolytic aluminum was 11.934 million tons, an increase of 3.6% year-on-year. According to relevant data, domestic aluminum consumption in April was 3.3-3.53 million tons, an increase of about 580,000 tons from March.

In the middle and late May, domestic electrolytic aluminum social stocks (including SHFE warehouse receipts) were below 1 million tons for the first time. On May 22, domestic aluminum electrolytic stocks (including SHFE warehouse receipts) consumed aluminum ingot stocks totaling 964,000 tons, a decrease of 472,000 tons from April. As of June 1, domestic electrolytic aluminum social stocks (including SHFE warehouse receipts) totaled 878 thousand tons. In May, domestic aluminum ingot stocks continued to achieve high-speed destocking in the context of increased supply, mainly based on the unexpected demand and increased supply of aluminum water.

Among them, the terminal product demand industry exceeded expectations, driving the industry chain expectations to improve. For example, in the automotive industry, the output of automobiles in April was 2.102 million units, a year-on-year increase of 2.26%. The sales volume of automobiles in April was 2.069 million units, a year-on-year increase of 4.41%, which continued to recover momentum in March. In April, the real estate development prosperity index was 98.86, an increase of 0.67 points from March.

Note: The orders for building profiles are concentrated in the fields of doors, windows, curtain walls and formwork, and the expected demand for old reforms and new infrastructure is strengthening. Demand for instant noodles in automobiles, home appliances, and machinery continues to recover.

3. Can aluminum rices fill the loss caused by COVID-19 in June

At present, the prices of contracts in the futures market during the year and recent contracts are higher than those of forward contracts.

1) Poor overseas demand, export pressure

Under the influence of overseas COVID-19, China's export orders have a greater impact. According to data from the General Administration of Customs, China’s exports of unwrought aluminum and aluminum in April were 441,177.1 tons. In the first four months of 2020, exports of unwrought aluminum and aluminum products totaled 1,628,923.2 tons, a decrease of 15.9% from 1,936,337.8 tons in the same period of the previous year.

In April 2020, 72,000 tons of scrap aluminum was imported, a year-on-year decrease of 53.3% and a month-on-month decrease of 6.7%. From January to April, the cumulative import of scrap aluminum was 270,000 tons, a year-on-year decrease of 64.7%.

2) Profits rebound, and subsequent production capacity uncertainty is strong

Roughly weighted valuation, aluminum consumption of 1.93 tons of alumina, 0.48 tons of anode carbon blocks, 0.02 tons of aluminum fluoride, 0.01 tons of cryolite, and 13,500 degrees of electricity. The weighted price of domestic electrolytic aluminum production costs is about 11,800-12,000 yuan/ton. The profitability of aluminum plants is gradually emerging from the pit bottom explosion, and the domestic subsequent production capacity may be released. (Quarterly estimated statistical tables for new production capacity in 2020, as follows)

3) Internal and external aluminum price differentiation, export pressure increases

With the recovery of domestic aluminum prices, foreign aluminum prices have been suppressed by the epidemic, and the market lags significantly. At present, the profit window for aluminum ingot imports has gradually opened. As of June 1, the renminbi price of LEMD was around 11,000 yuan/ton, and the main price of Shanghai Aluminum was around 13,100 yuan/ton.

The fundamentals of supply and demand in the domestic market have effectively improved, and social inventories have continued to decline. Domestic demand is expected to pick up in the second quarter, and prices have rebounded significantly. The supply and demand in foreign markets are relatively weak, the price difference between inside and outside is large, and exports are bad.

4. Based on domestic demand, June aluminum prices may enter a shock period

The current price trend is: domestic spot prices of aluminum ingots> Shanghai Aluminum's recent contract prices> Shanghai Aluminum's forward contract prices within the year> London aluminum contract prices.

4-5 copies of this wave of aluminum prices rose, and the spot impact factor was larger. From the domestic aluminum output in April, it can also be confirmed:

Domestic terminal consumption is picking up, aluminum ingot stocks continue to move down, current consumption of downstream consumer profiles and aluminum foil plates is good, aluminum plates and strips and recycled aluminum and aluminum cables have a tendency to weaken consumption, while considering that July and August are traditional aluminum consumption In the off-season (although the historical price trend, the off-season's impact on prices is not obvious), in an environment where exports are not easy, and based on domestic demand, business community analyst Ye Jianjun expects that the aluminum price in June will be weak. Convergence is good, and the probability of a substantial gap in domestic aluminum prices is not large. It is expected to run mainly in the range of 12,800-13,800 yuan/ton.

1) Late focus

The real estate completion cycle and the wire and cable industry are supported by policies & domestic auto and household appliance industry consumption and aluminum exports

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