[SMM analysis] profit upward transmission gives alumina upward strong power height depends on the marginal change of supply and demand

SMM July 10, the second quarter, the domestic alumina price performance bottomed out to rebound, and in late June began to expand. According to the calculation of SMM, the supply side increases and decreases in parallel and the demand side rises slightly within the month, and the shortage of metallurgical grade alumina in China narrows to about 64000 tons in June. In July, China's alumina market is still a month of increasing and decreasing production. In terms of production reduction, Chinalco Huaxing and Shanxi new materials began flexible production at the end of the month, and some alumina plants in southwest China had a roaster maintenance plan in July. In terms of increasing production, Guodian's individual alumina plants in Shanxi and Henan have resumed production plans. Guodian Investment Sichuan will mass produce alumina products in July, and under the stimulation of rising alumina prices, there may be more reduced production capacity to resume production. We expect the net import of alumina in July to be about 350000 tons, with a slight shortage of 147000 tons for the whole month.

Therefore, under the background of stable supply and demand, we believe that: (1) the high profit of electrolytic aluminum downstream in the short term is still a strong driving force for the current alumina price to maintain a strong rise, which highly depends on the marginal change of the relationship between supply and demand. Continuous attention should be paid to the increase and resumption of alumina production; (2) the level of price difference between regions will change, due to the rising demand in southwest China, the number of spot days of alumina in Guizhou and Guizhou has narrowed compared with the previous month, and the local market price has narrowed the discount to Shanxi, even a small rise in the market in early June; the spot pressure in Shandong is great, and the supply of low-priced imports is constantly impacting in the early stage of superposition, and the rate of local price increase is not as fast as that in the southwest and northern regions. (3) in the medium term, when the alumina market tends to be surplus again, the price may reach its peak, and it is necessary to pay close attention to the operation of alumina production capacity at the high cost margin, and the marginal cost will also form a certain support for the callback price below.

Figure 1. Regional price trend of SMM alumina

Source: SMM

(SMM Li Hao 021Mui 5166 6863)