Event: according to the data of Baichuan Yingfu, China's electrolytic aluminum production stopped at 2.747 million tons at the beginning of 2022. As of March 25, 2022, it has resumed production of 1.68 million tons, with a resumption rate of 61.2%. Among them, Yunnan resumed production of 940000 tons, accounting for 55.95% of China's total resumption scale; At the beginning of the year, it is planned that the remaining 2.625 million tons will be put into operation. As of March 25, 2022, 320000 tons have been put into operation, with an operation rate of 12.19%. Among them, 220000 tons will be put into operation in Yunnan Province, accounting for 68.75% of China's total production capacity. Since 2022, China's electrolytic aluminum production capacity has been significantly accelerated.
Yunnan will actively store water and optimize dispatching in 2021. There will be more water in 2022. At the same time, the current off-season of power consumption provides conditions for accelerating the resumption of production and production of electrolytic aluminum.
In the 21st year, we actively stored water and optimized the operation. In the dry season of the 22nd year, there was a lot of water and abundant hydropower supply. In 2021, due to the shortage of hydropower supply in Yunnan Province, the shortage of power supply in Yunnan Province was exacerbated. In order to ensure the power consumption of people's livelihood, electrolytic aluminum and other high energy consuming industries faced strict production restriction and shutdown policy requirements. In order to ensure the power supply, the Yunnan provincial government stored 8.515 billion cubic meters of water in the reservoirs and ponds of the whole province in 2021 on the basis of the annual water storage task of 8 billion cubic meters, An increase of 4.22% year-on-year, 623 million cubic meters more than the same period in 10 years. In addition, since November 2021, Yunnan Provincial Energy Bureau has strengthened the joint optimal operation of cascade and inter basin hydropower. In 2021, Yunnan Province increased hydropower storage capacity to 27.2 billion kwh, a year-on-year increase of 3.8 billion kwh, the highest level in recent three years. At present, Yunnan Province is in a dry season. From the perspective of water level, the water levels of major rivers in Yunnan Province are close to the warning water level, and the hydraulic power is relatively sufficient.
Superimposing the current off-season of electricity consumption, policies support the resumption and production of electrolytic aluminum enterprises: at present, it is in the off-season of electricity consumption, and the power supply is relatively abundant. According to the announcement of Yunnan Provincial Energy Bureau, Yunnan Provincial Energy Bureau, together with development and reform, industry and information technology and power grid enterprises, set up a special class for power operation scheduling, study and judge the power supply and demand situation of the whole province on a weekly basis, and orderly increase the operation capacity of green aluminum projects. As of February 22, the green aluminum project in the province has increased the power load by nearly 1 million KW compared with that before the increase, and released more than Shanghai Pudong Development Bank Co.Ltd(600000) tons of hydropower aluminum production capacity. It is estimated that by the end of March, the province's hydropower and aluminum projects in operation will reach 4.3 million tons, and the capacity utilization rate will reach 80%.
The resumption of production and production of China's electrolytic aluminum enterprises have significantly accelerated, raising the expectation of China's electrolytic aluminum supply
In terms of resumption of production, as of March 25, China's total resumption of production was 1.68 million tons, with a resumption rate of 61.2%, including 940000 tons in Yunnan Province, accounting for 55.95% of the national scale, 1067000 tons in China, including 400000 tons in Yunnan, accounting for 37.49% of the national scale. Under the current policy and power supply environment, it is expected that China's electrolytic aluminum enterprises will still maintain a rapid pace of resumption of production.
In terms of new production capacity, as of March 25, China has invested 320000 tons of new electrolytic aluminum production capacity and 2.29 million tons of electrolytic aluminum production capacity to be put into operation, including 220000 tons of new production capacity in Yunnan Province, accounting for 68.75% of China's total production scale, and 1.16 million tons of production capacity to be put into operation in Yunnan, accounting for 50.66% of China's total production capacity to be put into operation. Under the current policy and power supply environment, it is expected that China's electrolytic aluminum enterprises will still maintain a rapid pace of production.
According to the data of Baichuan Yingfu, up to now, the operating capacity of electrolytic aluminum in China has reached 39.258 million tons, an increase of 1.6 million tons compared with the end of 21 years, including 400000 tons of shutdown, 1.68 million tons of resumption of production and 320000 tons of new production in Guangxi due to the epidemic. The operating capacity has continued to rise since 2022. According to our statistics, it is estimated that the electrolytic aluminum production capacity can be resumed by 807000 tons and put into operation by 1.76 million tons within the year. It is estimated that China's electrolytic aluminum operation capacity will reach 41.825 million tons by the end of 22 years.
Although the overseas geopolitical tension shows signs of easing, the recovery of electrolytic aluminum production still needs time. On the one hand, the geopolitical tension in the early stage has further raised the energy price in Europe. Since the summer of 2021, the energy problem in Europe has intensified day by day. The energy shortage has led to the soaring electricity charges in Europe. Under the compression of profits, the European aluminum plant has passively reduced its production. According to SMM, since 2021, the annual production capacity of European electrolytic aluminum has been reduced by more than 875000 tons, while Russia contributes 40% of the natural gas demand of the European Union. The tension between Russia and Ukraine has also further exacerbated the energy problem in Europe; On the other hand, geopolitical tensions have increased the instability of the production of electrolytic aluminum devices. Rusal announced on March 1 that "due to the inevitable logistics and traffic challenges in the Black Sea and surrounding areas, it had to temporarily close the production of Nikolaev alumina refinery in Nikolaev region of Ukraine". At the same time, Australia announced that it would stop exporting alumina, bauxite and other raw materials to Russia. Although the current geopolitical tension shows signs of easing, it still takes time for electrolytic aluminum to resume production, and the annual output will still be affected.
On the demand side, external demand is still strong, and domestic demand needs to be transmitted by policy. Compared with the manufacturing PMI data of major economies in the world, the United States and the euro area are still at a high boom level, and the consumption demand of electrolytic aluminum in overseas economies is still strong. However, considering the transmission of interest rate to the consumption demand of durable goods, it is necessary to be vigilant against the decline of demand for electrolytic aluminum under the background of subsequent overseas liquidity contraction; However, China's policy has continued to increase since the steady growth was set at the end of 21 years. However, considering the time lag of policy transmission, epidemic disturbance and other factors, it is expected that it will take some time for domestic demand to recover. At present, the global demand remains high, but from the perspective of elongation, the demand for electrolytic aluminum in the future is still a race between the contraction of overseas liquidity and China's steady growth.
In terms of inventory: the inventory in 2022 is at a historical low. As of March 25, China's social inventory of electrolytic aluminum ingots was 1.039 million tons, a year-on-year decrease of 16.95%. Overseas, thanks to the gradual control of the global epidemic, superimposed on the European energy crisis and geopolitical tensions, it is difficult to see an increase in overseas electrolytic aluminum. LME inventory continued the trend of going to the warehouse for 21 years. As of March 25, LME inventory was 678100 tons, a year-on-year decrease of 64.79%, the lowest level since 2016.
On the whole, it is still difficult to change the tense pattern of supply and demand when China's electrolytic aluminum is resumed and put into operation. Under the support of low inventory, it is expected that the aluminum price will continue to be high. On the supply side, although the resumption of electrolytic aluminum production and the acceleration of production in China have increased the output of electrolytic aluminum in China, the stability of overseas electrolytic aluminum production will be further impacted by the geopolitical tension in the early stage, and the output of overseas electrolytic aluminum will be affected to a certain extent; On the demand side, the Federal Reserve has started the cycle of raising interest rates and shrinking the balance sheet. The high falling trend of overseas economy has been established, which has dragged down the overseas demand for electrolytic aluminum, while China's demand still needs further efforts of the steady growth policy. We expect the growth rate of global electrolytic aluminum demand to fall in 2022. On the whole, according to our calculation, the tight supply and demand pattern of global electrolytic aluminum in 2022 is still difficult to change, and the aluminum price will continue to be high under the support of low inventory.
Risk warning event: macroeconomic fluctuation exceeds the expected risk; Risk of weak aluminum demand; The risk of policy changes exceeding expectations; Risk of raw material price and aluminum price fluctuation exceeding expectations; The risk that the progress of the production and resumption project is less than expected; Risk of recurrent outbreaks; Risks such as untimely update of information and data used in the research report.
