SMM2 on March 17, in the SMM live aluminum live broadcast on February 16, SMM aluminum analyst Li Jiahui made an analysis and prospect of the aluminum market in 2022. Through the review of the trend of aluminum price from 2021 to 2022, this paper interprets the overall market in 2021 and makes a corresponding prospect and forecast for the overall market in 2022. She believes that the resumption of production in 2022 will run through the whole year, and the supply of production will be concentrated in the second half of the year. At the same time, high overseas energy costs limit the increase in electrolytic aluminum production capacity. On the demand side, there are great differences in aluminum consumption demand driven by different industry terminals, and the factors of a construction and transportation plate are ahead of schedule. It is expected that electrolytic aluminum will be balanced and low inventory will be maintained in 2022, so it is difficult to have room for substantial surplus.
Review of Aluminum Market Price from 2021 to 2022
Driven by frequent production cuts on the supply side and low inventory in China in 2021, aluminum prices fluctuated upward, reaching a high of about 24800 yuan in October. After October, aluminum prices retracted rapidly due to the influence of energy consumption, power and production restrictions and other factors. At the beginning of the first quarter of 2022, aluminum continued to go to the warehouse, and aluminum prices rose sharply again due to the production reduction of aluminum factories in Guangxi.
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Supply situation of domestic Electrolytic Aluminum Market in the first quarter
The pace of production reduction will be maintained in 2021, and the resumption of production in 2022 will run through the whole year, with production supply concentrated in the second half of the year.
The production capacity of electrolytic aluminum was reduced by more than 2.7 million tons affected by limited electricity, double control and flood in 2021. In the fourth quarter, with the easing of power tension in some areas, some enterprises resumed production and the operating capacity increased slowly. With the lifting of power cuts, Inner Mongolia gradually resumed production at the end of 2021 and basically returned to full production in January. Although Yunnan is currently in a dry period, it has gradually resumed production with the support of Electroweb.
The domestic production capacity of resuming production in January 2022 is 680000 tons, of which the production capacity of early production reduction is about 580000 tons, and that of idle plants is about 100000 tons. The scale of resumption of production is expected to reach about 1.2 million tons in the first quarter, and this part of production will be released in the second quarter.
The sudden production reduction caused by the epidemic in Baise, Guangxi will gradually resume production after the end of the epidemic, while the operating capacity of alumina is also affected, resulting in a shortage of supply and demand. However, at present, the epidemic situation in Baise in Guangxi has been well controlled, and enterprise transportation has gradually recovered.
The new electrolytic aluminum production is expected to be 1.08 million tons in 2022. The domestic electrolytic aluminum production capacity increment in the first half of the year is mainly reflected in the release of the previous reduced production capacity. The new production capacity is disturbed by various policies of electric power, and the production is concentrated in the second half of the year. By the end of January, the domestic operating capacity of electrolytic aluminum was 38.38 million tons, down 3% from the same period last year. In February, production increased slightly in Yunnan and other areas, but in consideration of the 420000-ton operating capacity reduced as a result of the sudden epidemic in Guangxi, the domestic operating capacity of electrolytic aluminum decreased instead of increasing in February. It is expected to return to the 38.48 million-ton level by the end of March, with a 2.4% decrease over the same period.
Overseas is affected by high energy costs, which limits the increase in production capacity. Most of the new overseas capacity is concentrated in Southeast Asia. Due to the energy crisis in Europe in December, electricity costs for aluminum plants rose and production cuts occurred frequently in Western Europe. so far, the scale of reduction in electrolytic aluminum production in Europe has reached 875000 tons, accounting for 17.5% of the built capacity in Western Europe. Production cuts in overseas aluminum plants on the one hand led to concerns about a shortage of global electrolytic aluminum supply, and on the other hand pushed up the water supply overseas.
The return of the internal and external ratio and the high overseas prices have led to the withdrawal of the ratio and the normalization of the closure of the import window. Domestic imports of aluminum ingots weakened, resulting in a rebound in bonded area inventories. During the same period, potential aluminum ingots in transit were forwarded to Malaysia, Singapore and other countries, and with the increase in LME aluminum ingot inventory, registered warehouse receipts increased sharply.
Electrolytic aluminum demand end
The consumption source of the domestic aluminum industry chain is divided into two parts: primary aluminum and recycled aluminum. Primary aluminum accounts for the vast majority of domestic aluminum consumption, and recycled aluminum is the supplement. There are great differences in aluminum consumption drivers among different industries, and construction and transportation sectors are the two main industries. In terms of deep processing, aluminum profile and aluminum plate, strip and foil are the two main parts.
2021, the "two red lines" of banks and the "three red lines" of real estate enterprises have made the funds of real estate enterprises tighten rapidly. The area of real estate completed in 2022 is also expected to fall from high levels, superimposed with the expected decline in new floor space. The output of domestic household appliances is slightly poor in the second half of 2021, and the demand for raw materials in the home appliance industry has improved from February to March.
With the alleviation of the problem of automotive chips in the automotive sector, domestic automobile production is expected to accelerate in the first quarter. The accumulative total installed capacity of photovoltaic in China is 252.2 GW in 2020. According to the forecast of China Photovoltaic Association, it is conservatively estimated that the new installed capacity of photovoltaic in 2025 is more than 90GW, so as to predict the increase of aluminum demand. According to estimates, the increment of aluminum demand driven by the new photovoltaic power station from 2021 to 2023 is 360000 tons / 390000 tons / 450000 tons respectively.
In terms of semi-finished product consumption, downstream consumption weakened in the first quarter, and the aluminum plate, strip and foil plate is still strong. According to the SMM survey and tracking, the operating rate of aluminum profiles, aluminum strip, foil, alloys and other enterprises showed a month-on-month decline, mainly due to the impact of the Spring Festival holiday, in addition, aluminum profiles are affected by the off-season consumption of the construction plate, and the decline of construction aluminum profiles is obvious. The operating rate is expected to pick up gradually in March.
In terms of domestic aluminum exports, export profits rebounded in the fourth quarter of 2021, and exports grew rapidly. As a result, exports of aluminum and aluminum products rebounded sharply.
Supply and demand balance and Price Forecast of Electrolytic Aluminum
During the Spring Festival, the domestic aluminum ingot library was not as expected. The cumulative accumulation of aluminum ingots in the first three weeks of the Spring Festival in 2022 and one week after the Spring Festival in 2022 was 170000 tons, an increase of a new low in recent years. The total accumulation of aluminum bars and ingots totaled 325000 tons, the total scale is also the lowest in nearly four years.
In terms of the distribution of aluminum bar inventory and aluminum ingot inventory, the accumulation of aluminum bar inventory since December 2021 is higher than that of the same period in previous years. With the inventory accumulation since February, the inflection point of aluminum bar inventory may appear, and the stock removal cycle will be earlier than that of aluminum ingots. Stocks of aluminum ingots are expected to reach a peak of about 1.1 million tons a month by the end of February.
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From the current supply and demand situation and downstream demand, SMM expects production in the first quarter of 2022 to decline compared with previous years, inventories will remain low, and the impact of aluminum prices will remain strong for the first time. Throughout 2022 as a whole, the overall operating output growth rate of electrolytic aluminum will not fluctuate much compared with 2021.
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