Aluminum prices slightly rebounded in December
| POLYVINYL ALCOHOL |
According to the Commodity Market Analysis System of Business Society, the average price of domestic aluminum ingots in the East China market on December 25, 2023 was 19083.33 yuan/ton, an increase of 2.20% compared to the aluminum price of 18673.33 yuan/ton at the beginning of the month (December 1).
In the long term, the current price is in a sideways range after a high level decline. Since May, it has been fluctuating below 19000 yuan/ton, and by the end of August, it has exceeded 19000 yuan/ton. In September, aluminum prices first fell and then rose. In October, the center of gravity of aluminum prices fell back to around 19000 yuan/ton and fluctuated. In November, aluminum prices were weak and began to recover after mid December, returning to the front line of 19000 yuan/ton.
Overview of Fundamentals
Supply side
In the early stage, Yunnan’s electrolytic aluminum production was reduced, with an expected scale of 1.17 million tons. Recently, heavy snowfall in the northwest region has affected transportation, and at the same time, the blizzard has affected the power supply of aluminum plants, resulting in a continuous significant decline in social inventory.
In terms of new production capacity, the remaining new production capacity of Baiyinhua in Inner Mongolia has been fully electrified, but some electrolytic cell production has not yet reached capacity;
The stable operation of domestic aluminum electrolysis plants is mainly affected by blizzard and cold wave weather. The Xinjiang region strictly implements the “2023 Implementation Plan for Emergency Peak shaving and Flexible Load Adjustment of Self owned Power Plants”. Some aluminum plants in the province have experienced peak shaving and load reduction production, but the impact on production is currently relatively small.
There is a replenishment operation on the demand side
In terms of demand: Downstream demand requires replenishment operations.
Aluminum profiles: The operating rate of leading aluminum profile enterprises is around 56%, mainly due to factors such as the off-season of industry consumption, resulting in fewer subsequent orders.
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Aluminum plate with foil: The average operating rate of aluminum plate and aluminum foil is above 75%,
Aluminum cables: maintain a high operating rate of around 67%.
Explicit low inventory levels
In terms of social inventory, following the start of destocking in the second half of July, inventory is relatively low. As of December 25th, the mainstream social inventory of electrolytic aluminum ingots in China was 414000 tons, with 149000 tons of inventory removed compared to November 30th. Based on year-on-year data, it is at a low level in the same period of nearly five years.
Cost driven by alumina
The explosion at the fuel depot in the capital of Guinea has raised concerns in the market about the supply of bauxite. It is reported that Chinese alumina companies are highly dependent on Guinea’s ore, with a total of 91.104 million tons of bauxite imported from Guinea from January to November, accounting for 70.2% of the total import volume. In addition, domestically, due to the heavy pollution weather in the north, the Shandong alumina plant has been shut down for ten days. The supervision and management of mining in Shanxi region is relatively strict, and the mines in Sanmenxia area of Henan province have not yet resumed production, resulting in a shortage of ore supply in Shanxi and Henan provinces. The price of alumina is firm.
Future market forecast
The positive cost side combined with the elimination of explicit inventory is expected to have a high probability of strong aluminum price fluctuations in the short term.
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