Event: according to SMM, on May 19, bahlil lahadalia, Minister of investment and director of the investment planning agency of Indonesia, said that the government would ban the export of bauxite and tin this year to support the downstream development of mining industry. Indonesian President Joko Widodo said in November 2021 that he might stop the export of bauxite in 2022, copper in 2023, or tin in 2024.
Comments:
Indonesia’s bauxite accounts for about 17% of China’s imports in 2021. The ban may raise the cost of alumina. According to customs statistics, Indonesia’s bauxite imports accounted for 14.3%, 16.7% and 16.6% of China’s bauxite imports from 2019 to 2021, respectively. From January to March 2022, Indonesia’s bauxite imports accounted for 20.7%, which may be related to China’s alumina plant’s concern about Indonesia’s ban on bauxite exports. After Indonesia banned exports, China may increase imports from countries rich in bauxite such as Guinea. Considering the impact of factors such as the increase of shipping distance, the cost of bauxite may rise, and the cost will be transmitted to alumina and downstream electrolytic aluminum.
Demand: the impact of the epidemic is weakened, and it is optimistic that the demand will pick up in the third quarter. Since the end of March, aluminum inventory has fluctuated between 1-1.1 million tons; As of May 19, the spot inventory of electrolytic aluminum fell to 943000 tons, down 70000 tons from May 5 and 47000 tons from the same period last year. We believe that the impact of the epidemic on downstream construction is gradually weakening, and the demand in the peak season in the second quarter may be transferred to the third quarter. We are optimistic that the demand in China’s real estate completion, automobile and other fields will continue to improve in the third quarter.
The shortage of overseas supply remains unchanged, and the import window is closed. As of May 19, overseas LME aluminum inventory was 512000 tons, down 66000 tons from the beginning of May and 423000 tons from the beginning of the year. At present, the price of overseas aluminum is still higher than that of China, and China’s raw aluminum import may decline significantly year-on-year in 2022. (from January to March, China imported 96000 tons of primary aluminum, a year-on-year decrease of 71%). The high cost of electricity in Europe and the production of Rusal are disturbed by the shutdown of alumina plants in Ukraine, and the overseas aluminum supply may remain tense.
Optimistic about the demand for repair, which will lead to the rise of electrolytic aluminum price and the profitability of aluminum enterprises. Although China’s electrolytic aluminum production capacity is gradually recovering, due to the tight foreign supply and the obvious year-on-year decline in imports, we are optimistic that the downstream operating rate in East China will gradually recover in June and after, and the improvement of demand will continue to promote the rise of aluminum prices. The average gross profit of electrolytic aluminum industry this week was 2878 yuan / ton, an increase of 532 yuan / ton compared with last week; As the aluminum price continues to rise, the gross profit per ton of aluminum is expected to continue to expand. Continue to recommend China Hongqiao, Henan Shenhuo Coal&Power Co.Ltd(000933) , Yunnan Aluminium Co.Ltd(000807) , Shandong Nanshan Aluminium Co.Ltd(600219) .
Risk warning: risk of electricity price policy adjustment; The high rise of aluminum price suppresses the risk of downstream demand; The growth of waste aluminum recycling exceeded expectations.
