London Metal Exchange (LME) benchmark aluminum price (hereinafter referred to as Lun aluminum) continued to brush a record high.
On March 3, the price of Lun aluminum rose to US $3650 / ton, breaking the record of US $3380 / ton in 2008.
On the same day, Hong Kong stock Rusal (00486. HK, hereinafter referred to as Rusal) rebounded sharply, with the largest increase of 23.34%. Rusal is one of the world’s largest primary aluminum producers. In the past ten trading days, due to Russia’s sanctions and other factors, the company’s share price plunged from HK $9.2 to HK $3.47, with a cumulative decline of more than 60%.
As of the closing on March 3, the company’s share price closed at HK $3.65, up 5.19%.
Shanghai aluminum is also following the rise. As of the closing of the day, the main contract of Shanghai aluminum closed at 23800 yuan / ton, an increase of 3.71%; Up 17.6% from the beginning of the year.
Therefore, the profit level of electrolytic aluminum enterprises ushered in a high level. Zhang Meng, an analyst at aize consulting aluminum, told the interface news that the average profit per ton of aluminum in the industry has reached about 6000 yuan, with high production enthusiasm.
According to him, the profit of China’s electrolytic aluminum industry has been monitored since 2011. By 2019, the average profit per ton of aluminum has exceeded 2000 yuan in only four months.
Zhongtai Securities Co.Ltd(600918) data show that in the first half of 2020, the profit per ton of electrolytic aluminum remained stable at more than 1000 yuan. Since then, affected by factors such as dual control of energy consumption and strong market demand, the profit per ton has continuously hit a record high. According to Mysteel’s calculation, the profit per ton of aluminum in 2021 is between 3000 yuan and 7000 yuan / ton.
“The current market logic is still that the strong external market drives the internal market.” Zhang Meng told the interface news reporter.
CICC nonferrous metals analysis pointed out that there are four main reasons for Lun aluminum’s continuous record high. First, the situation in Russia and Ukraine led to a sharp rise in energy prices in Europe, pushing up the cost of electrolytic aluminum and raising the risk of production reduction. Russian natural gas accounts for one third of the total consumption in Europe, and most of electrolytic aluminum in Western Europe generates electricity through natural gas and coal.
According to the calculation of CICC nonferrous metals, Western Europe has an electrolytic aluminum production capacity of 3.26 million tons. At present, it has announced a production reduction of 1.55 million tons, and has actually implemented a production reduction of 800000 tons, accounting for 1.1% of the world. The possibility of continuous expansion of production reduction cannot be ruled out in the future.
Second, the export of Russian aluminum products was blocked by swift sanctions.
Russia is a major exporter of aluminum. According to Russian customs data, from January to November 2021, Russia’s aluminum export volume was 3.1902 million tons, with an export volume of about US $6.35 billion, a year-on-year increase of 31% and 66% respectively.
“The annual output of electrolytic aluminum in Russia is about 4 million tons, of which about 80% is for export,” Zhang Meng told interface news
Third, the European and American economies are still recovering, and the demand for downstream aluminum products is expected to improve.
“China’s market demand has not yet ushered in a real peak season, but it is also in the process of recovery,” Zhang Meng said
Fourth, judging from the current progress and negotiations of the Russian Ukrainian war, there is no sign of the end of the conflict in the short term, and the supply shock is expected to be more sustained.
For the Chinese market, Zhang Meng pointed out that the social inventory of electrolytic aluminum has not reached the inflection point.
CICC nonferrous metals pointed out that China’s electrolytic aluminum usually accumulated in the first quarter. Compared with previous years, the inventory level this year is significantly lower. With the advent of spring peak season, the demand for replenishment in the downstream is gradually rising, and destocking is coming.
According to the data of Shanghai Nonferrous Metals network (SMM), China’s social inventory of electrolytic aluminum was 1.12 million tons on March 3, an increase of 1.9% month on month; A year-on-year decrease of 1.75%.
Xinda futures data show that after the Spring Festival, most aluminum enterprises in China started the production resumption plan, and the production resumption process in Yunnan, Shanxi and other places continued to advance. The total production resumption capacity was 2.747 million tons in 2022, and 1.22 million tons have been resumed at present.
Cinda futures said that from February to March, it was still in the off-season of seasonal consumption, and all kinds of terminal demand performed generally. In the medium term, the state has laid out a series of supporting economic policies and issued a number of policies to liberalize the housing market, with strong expectations for the recovery of infrastructure and real estate demand. With the solution of the chip problem in the later stage, the demand for automobiles and new energy is also expected to improve significantly.
Zhang Meng told the interface news reporter that due to the conflict between Russia and Ukraine, the increase in the cost of European energy supply, the impact of Russian Aluminum and the continuous recovery of Chinese consumption, aluminum prices are optimistic in the short term, and the medium and long term depends on the matching degree between China’s supply release and the demand side.
He believes that if photovoltaic, UHV and other bright areas can act as the engine leading the growth of aluminum consumption this year, aluminum prices will remain stable.
