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With the coming peak season downstream, aluminum is expected to continue to rise.
Sep 3,2020 15:51CST
Source:Liu Peiyang, Central Plains Futures
The content below was translated by Tencent automatically for reference.

SMM: with the gradual arrival of the traditional consumption season of "Golden Nine Silver Ten", the market is generally more optimistic about the recovery downstream of the aluminum industry, including traditional demand, new infrastructure demand and export recovery demand growth, so aluminum prices may hit a new high again after a short adjustment.

1) the economic recovery at home and abroad is obvious

From the recent release of the August PMI index, the world's major economies are showing a clear recovery. China's official manufacturing PMI index stood at 51.0 per cent in August, standing above the rise and fall line for six months in a row. Caixin China's manufacturing PMI recorded 53.1% in August, the highest since February 2011. among them, the manufacturing production index and the new order index both reached the highest level in nearly a decade, indicating a strong recovery in production and demand. Overseas, the US ISM manufacturing PMI recorded 56 per cent in August, the highest since January 2019, while the euro zone manufacturing PMI recorded 51.7 per cent in August, standing above the rise and fall line for the second month in a row. As a leading indicator of manufacturing PMI stabilizing for the better situation is clear, indicating that the macro-economic recovery will continue. A return to growth will clearly support commodity prices.

II) the low price of alumina rebounded

In late August, affected by the news of another production reduction in Hydro Alumina Plant in Brazil, alumina prices rose again, among which the Australian price of outer disk alumina FOB was obvious. Domestic alumina prices are picking up slightly at the same time, manufacturers are generally willing to ship goods, the holders maintain more wait-and-see, and the overall market is bullish. For the future, the impact of overseas production reduction news has gradually weakened, domestic production capacity has recovered, prices in the southwest region will remain strong under the support of tight balance, and the spot price of alumina will still go through a slow upward channel. it is highly restricted by the cash cost of alumina plants in the north.

III) imports of unwrought aluminum and aluminum materials exceed exports

According to data from the General Administration of Customs, China's imports of unwrought aluminum and aluminum products exceeded exports for the first time in July, mainly because the Shanghai-Lun ratio has continued to rise since late April, internal and external aluminum prices have been upside down, and import windows have been opened. the inflow of imported aluminum ingots and aluminum products has increased. At present, the consumption of aluminum profile and aluminum plate, strip and foil plate is still stable, and the operating rate of alloy plate has not dropped significantly with the recovery of the automobile market. In the case of profitable imports, imported aluminum ingots have significantly increased. Considering that the current internal and external aluminum price ratio is still high, and most of the imported aluminum contracts were signed 1-2 months ago, it is expected that the import volume of unwrought aluminum and aluminum products is still relatively high in August. On the other hand, due to factors such as blocked freight shipments affected by the epidemic, a sharp drop in foreign demand for aluminum, a high ratio of Shanghai to aluminum, trade frictions, and recent anti-dumping measures in Europe and other places, there is greater pressure on exports, but with the recovery and development of overseas economy, export demand is likely to grow.

IV) the inventory growth of electrolytic aluminum is not as expected.

As of September 3, the weekly inventory of domestic electrolytic aluminum was small, and the differences between regions continued to highlight. Gong Yi and Shanghai contributed the main increase. The weekly inventory of domestic electrolytic aluminum society accumulated 6000 to 761000 tons, but the overall growth rate was less than market expectations. There is no obvious accumulation phenomenon, and the inventory pressure has not yet appeared. Stocks of aluminium bars fell for the fourth consecutive week, falling by 4500 tonnes to 55500 tonnes as of Aug. 27, compared with last Thursday. LME aluminum inventories have been falling since August, falling by 83050 tonnes in August.

V) the downstream market is about to enter the peak consumption season

According to SMM data, statistics including aluminum profiles, aluminum strip, aluminum foil, aluminum cable and aluminum alloy downstream market data show that the weighted comprehensive PMI of the aluminum processing industry in August was 49.4, approaching the line of ups and downs, rising 4.9 percent from July and down 0.5 percent from last year. From the comprehensive analysis, it is expected that aluminum strip, aluminum profile and aluminum alloy are still in the expansion range in September, and the comprehensive PMI will rise further in September. According to the specific aluminum processing industry, aluminum strip, primary alloy and recycled alloy recorded a trend of economic expansion, aluminum foil, aluminum profiles and aluminum cables are still below 50, especially in terms of cables, the order of State Grid has not been started for a long time. Profiles are expected but need to be verified. From the perspective of the industry, the domestic automotive sector continues to recover, driving the corresponding aluminum demand, while the logic of real estate completion is still there. It is expected that Jinjiu Silver 10 will still play the role of a leader in aluminum consumption, and domestic demand will continue to maintain a strong performance.

Taken together, the manufacturing PMI index at home and abroad continued to improve in August, and the macroeconomic recovery continued to support commodities. On the supply and demand side, the price of raw material alumina rose moderately and rebounded at a low level as a whole; at present, the profits of the electrolytic aluminum industry are at a high level and pay attention to the release of new production capacity; the inventory of electrolytic aluminum society has rebounded at a low level, but the extent of accumulation is not as high as expected. inventory pressure is still small. In July, domestic imports of unwrought aluminum and aluminum products exceeded exports for the first time, and overseas export pressure remained. Downstream is about to enter the traditional consumption season, the operating rate is expected to continue to increase, in addition to aluminum foil in the peak season demand, profiles, cables, strips and other plates still have a certain gap from the peak season, still need time to verify. On the whole, the domestic aluminum price is expected to remain strong, it is suggested to be treated with bargain-seeking long thinking, the lower reference support range is 14000-14200 yuan / ton, the upper reference target range is 15500-16000 yuan / ton.

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