SHANGHAI, Oct. 20 (SMM)－The production limit plan of electrolytic aluminium plants in Shandong which has been the biggest focus was recently released. The regulation force is less than anticipation. With pervious poor fundamentals, SHFE Aluminium experienced a declining tendency. After Binzhou’s production limit plan released on Monday, SMM has reminded of risk of Aluminium drop in Wechat group of the industry as well as in regular comment.
According to Wang Rui, SMM Aluminium analyst, orders and launching rate of downstream processing plants in October has not been as good as that in September, with drop MoM (except Guangdong Province). There is also little good news in consumption-side demand. Concerning building, benefits of shantytowns transformation and rural market during the first half of the year has not continued and many projects in Beijing, Tianjin and Hebei suspend operation, which delay the demand. Demand in transportation industry is relatively stable, but rise amount of output and sales is far less than last year. Aluminium export continues to be weak without improvement. The only good news is that air-conditioner enterprises get a rise MoM and YoY for planned output, which promotes orders of air-conditioner foil plants. But air-conditioner foil accounts for a little in total aluminium consumption, so its contribution is limited.
Wang Rui says, rebound at low point of SHFE Aluminium today is mainly because by reduced inventories improves the market’s emotion. As per SMM statistics, the domestic aluminium ingot inventories today is 1.745 million tonnes, dropping 22,000 tonnes compared with Monday, which is because downstream has reduced their raw materials stock to lowest level with rational range to avoid risk of aluminium fluctuation. Recent continuous drop has stimulated enterprises to purchase intensively, with a sudden rise of shipment from the warehouse. But whether the drop of inventories is the turning point of inventories volume in this year still needs to be observed concerning demand change.
Concerning price, Wang Rui thinks there is probably further downward space in the short term, but considering changeable inventories and cost of electrolytic aluminium enterprises, it is not recommended to be over bearish.
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