Stimulated by the further expansion of the scale of electricity curtailment in the China Southern Power Grid, the domestic aluminum metal price once again rushed to the 2 yuan/ton mark.
Aluminum prices continue to remain high
In August, the China Nonferrous Metals Industry Association released the economic performance of the non-ferrous industry in the first half of the year, showing that in the first half of the year, the average price of aluminum in the domestic spot market was 8 yuan /ton, a year-on-year increase of 17421%. The average price of aluminum in the domestic spot market in mid-May was as high as 31.6 yuan/ton, and in late June it was adjusted back to 5 yuan/ton , a decrease of 19702 yuan/ton from mid-May, a decrease of 6%.
However, at the end of July, spurred by the further expansion of the scale of power rationing in the China Southern Power Grid, aluminum prices returned to near the May high.
According to data from the business agency, on August 10, the average price of domestic aluminum ingots in the East China market was 1,990.33 yuan/ton, an increase of 0.13% from the average market price of 19,856 yuan/ton at the beginning of the month. Taking the average market price of aluminum ingots at the beginning of the year (January 1, 2021) at 15,726.67 yuan/ton as the benchmark price, it has now increased by 26.43%. According to global metal network data, the ex-factory price of Shandong Hongqiao aluminum ingots was 20,470 yuan/ton on August 18, an increase of 90 yuan/ton (including 13% value-added tax) on the same day.
The price volatility in the futures market is closely related to the spot. Recently, the price of Shanghai Aluminum’s main contract 2109 has continued to be above 20,000 yuan/ton. On August 17, the 2109 contract had a high offset of 20,575 yuan/ton. On August 18, the main contract closed at 20,190 yuan/ton, a slight decrease of 0.79% on the same day.
Aluminum prices continue to be high, industry companies have considerable profitability, and stock prices have risen.
On August 18, Shenhuo shares reached 14.32 yuan per share in intraday trading, and the cumulative increase in the past 9 trading days has reached nearly 50%. The company recently announced that it achieved operating income of 15.511 billion yuan in the first half of the year, an increase of 85.74% year-on-year; net profit of 1.463 billion yuan, an increase of 606.21% year-on-year. The announcement stated that the substantial increase in performance during the period was mainly due to the gradual commissioning of the Yunnan hydropower and aluminum integration project, and the significant increase in electrolytic aluminum and coal prices. The profitability of the company’s main products has been greatly improved.
According to the non-ferrous industry economic performance data released by the China Non-ferrous Metals Industry Association in the first half of this year, in the first half of this year, the regulated non-ferrous metal industrial enterprises (including independent gold enterprises) realized a total profit of 163.97 billion yuan, a year-on-year increase (calculated on a comparable basis, the same below) 224.6%, an increase of 35.66 billion yuan from the profit realized in the first half of 2017, an average increase of 6.3% over the four years.
Power curtailment superimposes high cost
Recently, the electrolytic aluminum power limit in Southwest China has become stricter. China Southern Power Grid Guangxi Company requires the electrolytic aluminum plants in Guangxi Province to further reduce the power load by 30%. All aluminum plants using China Southern Power Grid need to reduce their current operating capacity by 30%.
According to the analysis by Ye Jianjun, an analyst at the Business Club, Guangxi’s annual production capacity is expected to be reduced at about 270,000 tons at the end of August, and the time for resumption of production is yet to be determined. According to statistics, since 2021, a total of 5 provinces’ electrolytic aluminum enterprises have reduced their production due to power curtailment policies, which have lowered their operating rates. According to published data, the current planned and reduced production capacity reached 1.626 million tons/year, accounting for 3.7% of the national annual production capacity.
According to statistics from Baichuan Yingfu, China’s primary aluminum output in July 2021 was 3.241 million tons, with an average daily output of 104,500 tons, and an annual output of 38.1602 million tons, which was a decrease of 0.14 million tons/day compared with the daily output of 105,900 tons/day in June 2021. In July, a small part of the electrolytic aluminum industry’s resumption of production capacity was still slowly advancing, and the previous reduction in production capacity did not resume production as scheduled, and there was no new production capacity, combined with the flood disaster in Henan in July, some of the production capacity was shut down, resulting in electrolytic aluminum production in the current month Has reduced. According to Baichuan Yingfu’s understanding, the previous production cuts in various regions in August may not be able to resume production. According to the current increase and decrease of production, the output in August 2021 will be about 3.26 million tons, and the daily chemical output will be about 105,200 tons, monthly average. Daily output may rise slightly.
Wang Xianwei, an analyst at China Securities Investment Futures, believes that the recent increase in aluminum prices is due to the expansion of the limited power supply on the supply side, and the market expects that the supply will continue to be tight; the other is the increase in power costs caused by power shortages and oxidation at the same time. The price of aluminum also rose slightly, and the obvious increase in the production cost per ton of aluminum also supported the price.
According to data from Shanghai Iron and Steel Federation, the price of imported bauxite has risen recently. Last week, ocean freight prices have generally risen, and the cost of imported ore has increased. Traders are mostly negotiating with alumina plants, and there have been few recent transactions in the market.
According to statistics from Baichuan Yingfu, in July 2021, the weighted average tax-included cost of China’s electrolytic aluminum industry was 13,989.42 yuan/ton, an increase of 179.9 yuan/ton from 1,3809.5 yuan/ton in June 2021, an increase of 1.3% month-on-month and a year-on-year increase of 9.1% . In July 2021, the raw material end continued to rise. The spot price of alumina rose by an average of 29 yuan/ton, and the anode carbon price rose by 75 yuan/ton this month. This superimposed on the increase in electricity prices in some areas, resulting in an increase in the cost of the electrolytic aluminum industry.
Wang Xianwei believes that the recent performance of the consumer side has been slightly weak, and the social inventory of electrolytic aluminum has increased slightly, mainly due to the small increase in the recent arrivals. At the same time, the time node for the third dumping of reserves is approaching. If the number of dumps is large, the price will be suppressed. The short-term 2109 contract maintains a high probability of fluctuations in the range of 19800-20500 yuan/ton.
As mentioned in the previous meeting of the China Nonferrous Metals Industry Association, the prices of major non-ferrous metals in the second half of the year showed a trend of high levels of correction. In the medium and long term, with the implementation of policies such as carbon emissions and the improvement of the fundamentals of supply and demand, the long-term low arrears of aluminum prices are expected to be improved. The realized profit in the third and fourth quarters may be slightly adjusted compared to the second quarter, but the realized profit for the whole year is expected to hit a record high.
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