The supply recovered slowly after the festival, and the price of electrolytic aluminum remained strong:
The epidemic affects the outward transportation of alumina in Guangxi, and China’s electrolytic aluminum production continues to be affected by the dual control policy of environmental protection.
1) according to Aetna, the built capacity of electrolytic aluminum in Guangxi is about 2.815 million tons. Due to power and other reasons, the operating rate has been insufficient. The operating capacity is about 70% of the built capacity, and the alumina production capacity is about 12.55 million tons / year, accounting for 13.8% of China’s total capacity.
2) in addition to supplying local electrolytic aluminum enterprises, alumina in Guangxi needs to be transported out about 500000 tons per month. Recently, affected by the closed control measures of the epidemic, the outward transportation of alumina has been blocked.
3) affected by environmental protection policies, alumina enterprises in Shanxi, Shandong and Henan have reduced production to varying degrees. According to SMM, the total reduction of alumina production capacity in the three provinces has reached 15.02 million tons.
During the Spring Festival, the accumulation of aluminum in the warehouse is slow, and the supply is limited, which may make the performance of aluminum in the warehouse stronger than expected. During the Spring Festival, electrolytic aluminum plants mostly consume the inventory in the plant. At present, the alumina inventory in some electrolytic aluminum plants can maintain production for about 7-10 days. Tight supply of alumina, slow resumption of electrolytic aluminum production or further support aluminum price. According to SMM, during the Spring Festival in 2022, the cumulative storage of aluminum ingots and rods increased by 178000 tons, an increase of 19.1%, and the cumulative storage in recent four weeks increased by 223000 tons, an increase of 25.1%, which was significantly lower than the level in recent three years.
The import window of electrolytic aluminum continues to close, and the import volume of electrolytic aluminum in China may be limited. According to SMM statistics, China’s net import of electrolytic aluminum in 2021 was 1572700 tons, a year-on-year increase of 48.90%. However, the conflict between Ukraine and Russia has pushed up natural gas prices, increased pressure on overseas energy costs, supported aluminum prices, and the import window may continue to close.
Real estate and infrastructure benefited from the steady growth policy, strengthened demand resilience, and new energy vehicles supported the continuous growth of aluminum demand in the automotive field. In 2021, China’s automobile production and sales reached 26.082 million and 26.275 million respectively, with a year-on-year increase of 3.4% and 3.8% respectively, ending the decline for three consecutive years since 2018. The annual sales volume of new energy vehicles exceeded 3.5 million and the market share increased to 13.4%. It is expected that with the acceleration of global electrification, New energy vehicles with higher unit consumption of aluminum will support the continuous growth of aluminum demand in the automotive field.
Overseas aluminum prices remained high, and the import of electrolytic aluminum was lower than expected, resulting in China’s inventory at a low level. However, China’s supply recovery was slow, and the aluminum went to the warehouse or exceeded expectations. The cost of raw materials and energy supported the price of electrolytic aluminum to remain strong. Electrolytic aluminum companies with cost advantages continued to be optimistic about the integration of raw materials and energy processing: Henan Shenhuo Coal&Power Co.Ltd(000933) , Shandong Nanshan Aluminium Co.Ltd(600219) , Tianshan Aluminum Group Co.Ltd(002532) .
MRL increased its shareholding in wodgina to 50%, controlled the underwriting right of MT Mairon to 51%, and accelerated its extension to the smelting link:
According to the latest announcement of MRL, from February 1, 2022, the company will control 51% of the underwriting right of MT Mairon (50% equity remains unchanged), and sign a lithium hydroxide processing agreement with Ganfeng Lithium Co.Ltd(002460) for this part of underwriting. The term of the agreement is from February to August 2022, and the agreement time can be extended. MRL is expected to sell lithium hydroxide products from May 2022, which will be sold by Ganfeng Lithium Co.Ltd(002460) . In addition, MRL will increase its holdings of wodgina from 40% to 50%, and will be responsible for the management and operation of wodgina. The shareholding ratio of kemerton lithium hydroxide smelting plant remains 40% of MRL / 60% of ALB, and the raw materials are provided by greenbushes. MRL and ALB will build a new lithium hydroxide smelter overseas with a 50% / 50% equity ratio, which will be operated and sold by ALB. MRL hopes to expand more smelting capacity to digest wodgina ore, and is expected to achieve 100000 tons of lithium hydroxide capacity within five years. The company released its H2 production and operation data in 2021:
\u3000\u30001、 Mt Marion
1) output: 198000 tons
2) sales volume: 207000 tons, with an annual export of about 489000 tons in 21 years.
3) production expansion: MT Marion’s current annual output is 450-475000 tons, and it is planned to expand production by 20-30% to 54610500 tons.
4) cost: 732.4aud/t, which is largely due to the increase of freight and royalties.
\u3000\u30002、 Wodgina
Production resumption schedule: Production Line 1 has a total capacity of 250000 tons of lithium concentrate / year, which is expected to be put into operation in April 2022; 2 / 3 of the production line, with a total of 500000 tons of lithium concentrate, will be re produced according to the market demand.
Under the background of the continuous scarcity of lithium concentrate, the trend of resource + smelting integration is more prominent. On the one hand, the smelting end actively obtains upstream raw materials to ensure the operating rate and ton profit; On the other hand, the resource end intends to extend to the smelting end to obtain more added value. It is suggested to continue to pay attention to the targets with perfect resource layout and smooth integration logic, such as: Ganfeng Lithium Co.Ltd(002460) , Tianqi Lithium Corporation(002466) , Yongxing Special Materials Technology Co.Ltd(002756) , Youngy Co.Ltd(002192) , Qinghai Salt Lake Industry Co.Ltd(000792) , Tibet Mineral Development Co.Ltd(000762) , etc.
Glencore’s cobalt production increased by 14% year-on-year in 2021, and joined hands with britishvolt to build a UK electric vehicle battery recycling plant:
According to the production report of Glencore in 2021, the company’s own copper output was 1.957 million tons, a year-on-year decrease of 5%, mainly due to the sale of Mopani, the expected decline in the grade of antapaccay and the reduction of copper by-products of zinc and nickel ores in the mature stage; The output of self owned cobalt was 31300 tons, with a year-on-year increase of 14%, mainly due to the increment brought by the restart of mutanda in 2021; The output of self owned zinc was 1117800 tons, a year-on-year decrease of 4%; Nickel production was 102300 tons, a year-on-year decrease of 7%, due to the shutdown and capacity maintenance of Murrin in the second quarter. In the fourth quarter, the output of cobalt ore was 7900 tons, with a year-on-year increase of + 36.21% and a month on month increase of – 8.14%. The progress of supply release remains to be seen.
The production guidelines in 2022 are consistent with the investor update in December 2021. According to the production guidelines for fiscal year 2022, the output of copper will reach 1.12-1.18 million tons, the output of cobalt will be 45000 tons, the output of nickel will be 110000-120000 tons, and the output of zinc will be 1.08-1.14 million tons. In the outlook period from 2022 to 2024, the total output of cobalt will increase due to the restart of mutanda and Katanga’s production increase plan; Nickel production will increase due to the increase in koniambo and the upcoming Canadian expansion project; The increase in zinc production in zhaorem (kazzinc) will be offset by the disposal of assets in Bolivia and the closure of the mine at the end of its life period. At the same time, zinc production will decline in 2024, which is consistent with the plan to close the mine.
At present, the original supply of cobalt is still in short supply due to the epidemic and logistics constraints, and the cobalt price may continue to fluctuate at a high level. It is suggested to pay attention to companies with copper and cobalt mineral resources release potential: Zhejiang Huayou Cobalt Co.Ltd(603799) , China Molybdenum Co.Ltd(603993) , Chengtun Mining Group Co.Ltd(600711) , Nanjing Hanrui Cobalt Co.Ltd(300618) etc.
Risk warning: demand is lower than expected, supply release is higher than expected, etc
