[SMM analysis] will the inverted price of recycled aluminum and primary aluminum continue?

Since October 2018, the price center of recycled aluminum ADC12 has been declining, especially in the past two months. We suddenly found that the difference between ADC12 and A00 aluminum continues to narrow, or even upside down, will this market continue?

First of all, we take a look at the time when the price difference between ADC12 and A00 aluminum price narrowed or even appeared in the past two years, and analyzed one by one.

Time 1: October 26, 2016 to November 14, 2016

Reason analysis: transportation is not smooth consumption of aluminum ingot inventory continues to decline, superimposed freight rising factors, aluminum prices rose sharply. On the other hand, the price of recycled aluminum ADC12 lags behind that of raw materials and its own price relative to aluminum price, and the order of recycled aluminum is increasing, and the consumption of recycled aluminum is better, which makes the price of recycled aluminum ADC12 remain high after the fall of follow-up aluminum price.

Time 2: 17 August 2017 to 24 August 2017

Reason analysis: supply-side reform to electrolytic aluminum production capacity is expected to be gradually realized, the concentrated release of market sentiment led to a surge in aluminum prices. Recycled aluminum enterprises in the face of skyrocketing aluminum prices wait-and-see mood is strong, resulting in recycled aluminum ADC12 price without market, its price rise is also relatively slow, making short-term prices upside down. However, after the wait-and-see mood, the order of recycled aluminum enterprises is still OK, and the price of recycled aluminum ADC12 quickly opened the price gap.

Generally speaking, the common ground of the two previous price inverses lies in the fact that the surge in aluminum prices is the inducement, and the subsequent orders of recycled aluminum enterprises are better, followed by a rapid rise, and when the market sentiment gradually returns, the price of recycled aluminum ADC12 can still remain high.

Time 3: may 27, 2019 ~?

Background analysis: A00 aluminum prices since the Spring Festival, affected by the second quarter consumption recovery expectations, aluminum prices rebounded from the low. And as a result of the decline in social aluminum ingot inventory in line with expectations, aluminum prices rose steadily.

Recycled aluminum since the end of 2018, due to poor consumption of terminal cars, prices have been falling, and the original aluminum prices have even appeared a rare trend contrary to the trend.

Difference analysis:

The same point: the inducement is caused by the rise in aluminum prices.

Difference: aluminum prices rose less, the rise is also relatively flat, not a sudden sharp rise. The downstream demand of recycled aluminum enterprises is different, the terminal demand is not good for a long time, and there are no signs of improvement. It is difficult to see the rapid rise in aluminum prices in the previous ADC12 prices.

Considering that more than 80% of the products in the recycled aluminum industry go to the automobile industry, and the operating rate of the recycled aluminum industry is highly related to the automobile output, it is more accurate to analyze the downstream demand of the recycled aluminum market with the automobile output. For now, in July, the implementation of the national six standards in 14 provinces or municipalities directly under the Central Government is just around the corner, and Guowu Motor vehicles sharply reduced prices to sell off inventory. In order to cooperate with going to the warehouse, Guofu Motor Company is bound to stop production on a large scale, and it will be difficult for Guofu Motor Company to put on the market in large quantities before July. But after July, first of all, Guofu production is expected to gradually resume, another 5G replacement may also provide some orders for the recycled aluminum industry, demand may be higher than in June. June may be 2019 recycled aluminum industry trough, ADC12 and A00 aluminum price gap narrowed, upside down to continue to make sense. After entering July, the price difference between ADC12 and A00 aluminum stabilized due to the improvement of demand, while the price trend of recycled aluminum in the second half of the year still depends on the specific performance of downstream consumption. However, from the long-term trend, when the growth rate of domestic automobile development slows down, it will be more like the foreign market, ADC12 and A00 aluminum price upside down has become the norm.

(Shanghai Nonferrous net is easy to shine)