[SMM Analysis] demand bottom Aluminum Price downside risk increases recycled Aluminum Industry enters the most difficult period

This week A00 aluminum price first raise and then suppress, the center of gravity continues to lower than last week. As of Friday, it was down 90 yuan per ton from last week, and the weekly average price was down 62.5 yuan per ton. The reason is mainly due to the original aluminum consumption, the market is generally optimistic that the strong demand brought about by the completion of real estate in the second quarter will gradually weaken over time, the decline in social aluminum ingot inventory has been reduced, and aluminum rod processing fees have also dropped. In terms of cost, alumina prices fell, coupled with the supply of more and more electrolytic aluminum enterprises in the second half of the year to resume production, the market for the future electrolytic aluminum market fundamentals gradually from more to empty, aluminum prices downside risk significantly increased. However, because of its lag, the price of scrap aluminum will fall at a slower rate than the price of aluminum.

For the recycled aluminum market, affected by the sudden implementation of the six standards ahead of time, the terminal five cars went to the warehouse on a large scale, and the demand of downstream die-casting enterprises dropped sharply, which made the recycled aluminum industry even worse. Between mid-June and mid-June, recycled aluminium companies generally reported that orders were worse than in May, and there is a good chance that this will continue for the remaining two weeks of June. Therefore, when the price of aluminum fell, the probability of recycled aluminum ADC12 fell rapidly due to market competition. Given the slower rate of decline in scrap aluminium prices, profits of recycled aluminium companies will be further squeezed, which is tantamount to a punch for some recycled aluminium whose prices are already struggling near the cost line, especially those with relatively large inventories. The recycled aluminum industry has entered the most difficult period.

According to CAA data, in May, car production and sales expanded year-on-year, with production and sales reaching 1.848 million and 1.913 million vehicles respectively, down 9.9 per cent and 3.4 per cent respectively over the previous month, and down 21.2 per cent and 16.4 per cent respectively over the same period last year. The year-on-year decline was 6.7 and 1.8 percentage points higher than the previous month. Confirmed the national five cars to the warehouse on a large scale. At the same time, in the second half of the year, with the continuous increase of models in line with the sixth National Standard, as well as the continued effectiveness of a series of policy measures such as tax cuts and fees, in particular, in early June, the National Development and Reform Commission, the Ministry of Ecological Environment, and the Ministry of Commerce jointly issued the Circular on promoting the Renewal and upgrading of key Consumer goods and the Recycling of Resources (20119-2020), which brought about a relatively positive role for the passenger car market. Production and sales of new energy vehicles will also continue to maintain rapid growth. In addition, the replacement of 5G will also bring some support to the recycled aluminum industry, which may become the most difficult period for the recycled aluminum industry from May to June.

However, for the return of the price difference between ADC12 and A00 aluminum price, SMM is not optimistic in the short term. On the one hand, due to the increase in the number of domestic cars, the development of the automobile industry has slowed down; on the other hand, the demand for recycled aluminum has declined in the short term after the replacement of new energy vehicles. Combined with the overseas market, the relatively stable automobile industry makes the overseas ADC12 price lower than the A00 aluminum price all the time. According to the author's judgment, the resplendence of recycled aluminum industry still needs to wait for new energy vehicles to enter the scrapping cycle, which is difficult to achieve in the short term.

(Shanghai Nonferrous net is easy to shine)