US capacity gap remains in Shanghai aluminum easy to rise and fall

As of March 18, domestic electrolytic aluminum spot inventory was 1.25 million tons, an increase of 228,000 tons compared with February 22.According to historical experience, it will go to the library again in 1-2 weeks.Electrolytic aluminum disk profit "full".As of March 22, Shandong regional profit is 5200 yuan/ton, has exceeded the highest value in 2020.Overall, electrolytic aluminum inventories are low and U.S. demand may not be fully released.As of March 23, 124 million people in the United States had been vaccinated, 40 percent of them, about a month faster than planned.Before the U.S. capacity gap narrowing, aluminum prices still have strong support. 

A carbon-neutral vision will drive up the long-term cost of electrolytic aluminum

According to SMM reports, on March 12, Baotou Municipal Development and Reform Commission issued a notice on "Red Alert Response Measures for Double Control of Energy Consumption in Baotou City (First Quarter)", involving about 432,000 tons of electrolytic aluminum production capacity.According to the requirements of the document, the kilowatt-hour cost of Inner Mongolia self-supplied electricity will increase by 0.01-0.02 yuan, and the impact will be limited for the time being.However, if the energy control measures taken in Inner Mongolia since February are viewed from a carbon-neutral perspective, there may be more mandatory energy control policies in the future, and the future costs of self-owned thermal power plants may continue to rise.

In 2021, the cost per kilowatt-hour of carbon-neutral power generation will have a positive green premium of 17 percent, according to China International Capital Research Institute.By 2030, the price premium for the generation segment will fall to -17%, and the green premium for the power sector combined will fall to -4%, meaning that energy costs will first rise and then fall over the next decade.The cost of alumina and thermal coal accounts for about 40% of the cash cost of electrolytic aluminum, which is significantly affected.It is expected that electrolytic aluminum industry will continue to be high - pressure policy.Electricity prices could be added to production costs in the form of continued capital expenditure or carbon emission permits and punitive electricity charges, significantly raising prices.

If the electricity price increases by 17%, the aluminum cost of electrolytic aluminum tons in Shandong will increase by 734 yuan.Since February, the price of electrolytic aluminum has risen by more than 2000 yuan/ton, and this cost may have been partially included in the aluminum price.

Domestic demand recovery is better, aluminum alloy prices led up

Since the epidemic, the demand for aluminum rods is the first to recover, and its corresponding terminal demand is the recovery of real estate after the cycle.In the end consumption industry of aluminum, construction and structural parts account for 30% of China's aluminum consumption, and delivery accounts for 11.4%.In the past six months, the demand for delivery has recovered significantly, and the real estate sales and land purchase costs have sufficient staying power.In February, the cumulative growth of commercial housing sales volume was 133.4%, the cumulative growth of land purchase fee was 16.4%, and the cumulative growth of new housing construction area was 64.3%, all showing acceleration.Passenger car sales increased 73.97% year on year, while passenger car inventory was only 483,000 units, the lowest since 2015.From the perspective of more macro guidance, social financing exceeded expectations in February, but the overall stock of social financing scale and the M2 scissors gap are still falling, China's liquidity turning point has been basically confirmed.Aluminium prices are now more supported by a capacity gap caused by the Fed's credit creation, which will push up prices in Shanghai through imports and exports.

As of March 19, the price of ADC-12 aluminum alloy ingot in Shanghai is 17,600 yuan/ton, and the price of 6063 aluminum rod in Foshan is 16,610 yuan/ton, both close to the highest price in 2 years.Among them, ADC-12 aluminum alloy ingot prices still hit a new high within the year.

LME aluminum was heavily delivered in March and overall inventories remain low

In March, the LME delivered a large amount of aluminum, with 617,000 tonnes of electrolytic aluminum delivered in the week of March 9-15, about half of its previous inventory.Before the delivery, the LME aluminum premium has fallen naturally.As of March 22, the LME aluminum litre premium (0-3) was at minus $29 / tonne, a one-month low.The delivery of electrolytic aluminum enterprises may be more from the consideration of rising premium.But even with the large deliveries, LME stocks stood at 1.96 million tons as of March 22, still low compared to the 4 million to 5 million tons in 2010 -- 2015.

To sum up, as of March 23, domestic electrolytic aluminum stock and exchange stock totaled 1.62 million tons, which will re-enter the destocking stage in the next one to two weeks, but the destocking has limited impact, the main contradiction in the short-term market is still the capacity gap in the United States, and it is more likely that the aluminum price will remain strong.