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Aluminum Prices Fluctuate At High Levels, Concerns About Insufficient Supply Continue
Summary:
The situation in Russia and Ukraine has been repeated, but natural gas is difficult to solve in the short term. Overseas reported inventories continue to fall, premiums continue to rise, supply and demand patterns continue to be tight, and LME aluminum prices are strong under the support of extremely low inventories in Western Europe. The domestic epidemic has affected the expansion of demand, and the pace of production resumption has accelerated, but the closure and control have also had a significant impact on logistics. The apparent inventory increased slightly against the season but is expected to be relatively limited. The short-term trend is mainly high and volatile. Today’s 22500-23000 yuan / ton.
Negotiations between Russia and Ukraine were repeated.
Germany prepared for Russia’s “cutoff of supply”, launched a first-level emergency plan for natural gas, and called on consumers to “conserve gas”. The two prime ministers agreed that experts from both sides should discuss the purchase of natural gas in rubles. Germany’s March CPI surged 7.3% year-on-year, the highest in four decades. The problem of natural gas shortage in Europe is difficult to solve. Natural gas prices rose by 10%, and London metals generally rose. At this stage, energy is still the most important factor determining the rise of aluminum from the perspective of inflation and aluminum supply expectations.
According to CRU’s research, the impact of the epidemic is mainly concentrated in truck transportation and aluminum. Hongqiao has implemented closed-loop management of its aluminum smelter since March 18. This keeps production at its lower smelters normal. Major processing companies in Shandong, Henan and Gansu said that they and their terminals were facing difficulties in product shipments and had to reduce operating rates. As a result, there is a negative impact on the demand for primary aluminium.
In terms of resumption of production, high profits have accelerated the pace of resumption of production in electrolytic aluminum plants. More than about 1.2 million tons of aluminum smelting capacity has been restarted since the fourth quarter, and this batch of aluminum ingots will enter the market in the second quarter. According to the latest developments in Yunnan and Gansu, aluminum smelting capacity is expected to increase by another 1.5 million tons/year by the end of June. Data from CRU showed that the operating capacity in February was 38.6 million tons/year, and will reach 41 million tons/year in the second quarter.
In terms of social inventory, according to statistics, the social inventory of electrolytic aluminum decreased by 100,000 tons on March 28 compared to March 10. In terms of different regions, Shanghai: decreased by 12,000 tons, Wuxi increased by 17,000 tons, Foshan decreased by 48,000 tons, and Gongyi decreased by 34,000 tons. The decline in inventory was mainly concentrated in the Foshan and Gongyi areas. The COVID-19 outbreak has affected the shipment of aluminum ingots to the central and eastern regions of China and the outbound shipments to the eastern regions. At present, the inventory of main semi-finished products is relatively high, and it is difficult for aluminum processing enterprises and customers to deliver products and reduce production.
LME inventory continued to fall to 650,000 tons, the lowest point since 2006. European and American trade premiums continued to rise, supply concerns lingered, and extremely low European inventories will continue to support the stability of LME aluminum prices.
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