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It Is Not Appropriate To Over Estimate The SME Price
Mar 15, 2018

High inventory, consumption is not busy making aluminum prices retreat, since last November has been falling for nearly 5 months, the cumulative decline of 20%, is a variety of basic metal inside the deepest decline. At present, the spot price of aluminum ingot has fallen below 14000 yuan / ton. Due to the low profit of aluminum factories, some aluminum factories even have lost money, and the space for aluminum prices to continue to fall deeper is still limited.


Fundamental change is the key to the trend of aluminum price


The transformation of the supply and demand pattern and the decline of the stock are the key to the aluminum price out of the weak pattern.


From the supply side, in 2017, the capacity of electrolytic aluminum in China is about 43 million 500 thousand tons, and the production of electrolytic aluminum is 36 million 500 thousand tons in the country. This year, the government will continue to deepen the supply side reform, and the capacity of electrolytic aluminum will be reduced. If the construction rate of the aluminum plant is similar to that of last year, the production of aluminum ingot is up to the same level as last year, and it is estimated to be about 36 million tons. From the demand side, according to the growth rate of about 6% per year in the last two years, the total amount of electrolytic aluminum demand in China is about 36 million tons this year. Therefore, the supply and demand of electrolytic aluminum in 2018 is in a tight balance.


From the point of view of stock, the stock of aluminum ingot in China has been innovating repeatedly, and the stock of aluminum rod has fallen down, but the aggregate inventory of aluminum ingot and aluminum rod is still at a historic high. In January 2018 and February, due to the heavy snow in the whole country and the long holidays in the Spring Festival, the construction site began to shut down earlier, and the aluminum plant's operation rate dropped sharply, and the aluminum ingot inventory increased faster. In March, the domestic start season is coming, and the growth rate of aluminum ingot stock will be slowed down. If the inventory of aluminum ingot consumption in the peak period of declining turning point, from the side to confirm the situation of domestic aluminum ingot supply is tight.


The spot discount is the vane for the improvement of the basic surface


Open since November last year, the aluminum price decline after the spot is aluminum disk premium 100 yuan / ton, in December of last year discount even more than 300 yuan / ton, the average premium before the Spring Festival in 150 - 200 yuan / ton. After the Spring Festival, the spot aluminum ingots gradually narrowed down. In March 12th, the price of spot aluminum ingot of the Yangtze nonferrous metal network was 80 yuan / ton, which was significantly better than that of the 200 yuan / ton before the Spring Festival. This is a positive signal that the downstream demand shows.


Aluminum loss is a signal to the stage of aluminum valence


According to the proportion of the raw material components of the aluminum ingot, the author calculates the general profit of the main production aluminum factories in China since 2015. The following figure is taken as an example. At the end of 2015, the aluminum price hit a historical low level. It was the profits of aluminum producers in different areas at a low level. After that, the aluminum price in 2016 benefited from the national supply side reform. At the end of 2016, aluminum price phased return, aluminum plant profits declined. When the profit of Shandong aluminum factory was negative and the profit of Inner Mongolia aluminum factory was close to zero, the price of aluminum ingot futures also fell to the stage base, and the price of aluminum recovered in 2017.  After November 2017, the price of aluminum fell from high to high, and the profits of Shandong and Inner Mongolia aluminum factory were again low. At the end of December 2017 aluminum prices rebound, around the aluminum plant profits along with improved. At the beginning of 2018, the price of aluminum returned to the decline, and the profits of all aluminum factories in various places were in the low level, and some high cost aluminum factories had fallen into a loss. Therefore, it is presumed that the price of aluminum may not be far from the bottom of the stage.