SunSir: On September 5th, Aluminum Prices Fell, Inventory Accumulated Month on Month, and Aluminum Prices May Fluctuate Laterally in the Future Market

Aluminum prices exceeded 19,000 RMB/ton in September

According to the Commodity Market Analysis System of SunSirs, on September 5, 2023, the average price of domestic aluminum ingots in the East China market was 19,253.33 RMB/ton, a decrease of 0.88% compared to the previous trading day, and a decrease of 1.82% compared to the aluminum price of 19,610 RMB/ton at the beginning of the month (September 1).

In the long term, the price was in a sideways range after a high decline. Since May, the price had been fluctuating below 19,000 RMB/ton, breaking through 19,000 RMB/ton at the end of August.

Overview of Fundamentals

Favorable factors in the raw material end enhanced:

1. The continuous production restrictions in the Sanmenxia area of Henan Province, coupled with the planned restart of an aluminum oxide enterprise in Inner Mongolia, involved a production capacity of approximately 500,000 tons. The routine equipment maintenance work of some aluminum oxide enterprises in Shandong and southwestern regions, as well as the increase in overseas bauxite prices, had jointly exacerbated the problem of tight supply of bauxite. The cost of aluminum oxide had increased, and the price of aluminum oxide was firm.
2. Thermal coal was affected by news and has positive support in the short term.

Pressure on the supply side increased

Supply side: With the resumption of production by electrolytic aluminum enterprises in the southwest region, the production capacity was at a relatively high level. As of September 5th, the resumption of production in Yunnan region had come to an end. Although the production capacity was relatively high, the proportion of aluminum water was still high, and the supply of aluminum ingots was still tight. The production of electrolytic aluminum in July was 3.481 million tons, a year-on-year increase of 1.5%; The cumulative production from January to July was 23.618 million tons, a year-on-year increase of 2.8%. In August, with the release of production capacity in the Yunnan region, there were still expectations of production capacity growth.

Low Inventory

In terms of social inventory, following the start of destocking in the second half of July, inventory was relatively low. As of September 4th, the mainstream areas of domestic electrolytic aluminum ingots had a social inventory of 477,000 tons, with a cumulative inventory of 20,000 tons compared to August 29th. However, compared to July 31st, the inventory was 506,000 tons and 29,000 tons were removed. Based on year-on-year data, it was still at a low level in the same period of the past five years.

Market outlook

Macroscopically, there were advantages and strong supply and demand. As of September 5th, electrolytic aluminum production capacity was operating at a high level, but the high aluminum water ratio led to a low mainstream inventory of aluminum ingots in society. Aluminum had exceeded 19,000 RMB/ton, mainly supported by low inventory and strong demand expectations, coupled with rising costs. However, recently, aluminum ingots started to accumulate on a month to month basis, and it is expected that aluminum prices will fluctuate around the 19,000 RMB/ton line in the short term.

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