SMM News: since August, aluminum prices are in a high and wide fluctuation trend, traditional consumer off-season social inventory has not formed a trend accumulation bank to support aluminum prices at a high level, and the periodic decline is mostly due to the linkage impact caused by macro factors, oil plummeting, Sino-US-China-India relations are tense, and the fundamentals of aluminum supply and demand are not strongly related. Enter the gold nine silver ten, the current consumption season expectations have not been falsified, the short-term basic face of aluminum prices have a strong support, social inventory performance has become a key barometer of short-term aluminum prices.

The supply pressure will continue to increase.

With the introduction of new production capacity in southwest Inner Mongolia and other places, domestic electrolytic aluminum production increased month by month. According to smm statistics, China's primary aluminum output in August was 3.19 million tons, an increase of 6.13 percent over the same period last year and 2.2 percent over the previous month. Stimulated by high profits, electrolytic aluminum enterprises are more enthusiastic in putting in. The weighted average profit of electrolytic aluminum has been maintained at more than 2000 yuan / ton for three months, and the new production capacity and resumption capacity may reach about 1.6 million tons in the third quarter. Taking into account the time distribution of production and the delay of production release, the supply-side increment has a limited impact on the third quarter, or a cluster in the fourth quarter.

From the cost point of view, the Hydro alumina production reduction incident did not have a substantial impact on the global alumina supply and demand pattern. Alumina prices finally fell back to the starting point after a brief reaction, and the myth of winter storage in alumina prices is no longer. The high proportion of long orders makes the spot market transaction limited, the leading enterprises have a stronger say, and the price lacks flexibility, so the production cost of electrolytic aluminum enterprises is in a relatively stable state. Electrolytic aluminum enterprises will be in a state of profit for a long time, which will make the investment of new production capacity and resumption of production plan will be effectively promoted for a long time.

Since May, the primary aluminum import window has been opened, and it is still on the edge of import profits. the import volume is expanding month by month, and the inventory in the Shanghai Free Trade Zone has increased to 40,000 tons. The increase in import volume has intensified the supply pressure of domestic primary aluminum. However, due to the expectation of gold, silver and silver consumption season, the increase in supply is not the main concern of the market at present, and it has not yet been reflected in aluminum prices. Social inventory performance has become a key barometer affecting short-term aluminum prices. If peak season expectations are falsified and aluminum prices logically return to the situation of annual oversupply and demand, the fact of increased supply may be magnified.

Apparent consumption performance remains strong

On the one hand, the V-word reversal of aluminum price in 2020 is due to the universal effect brought by policy easing, on the other hand, the apparent consumption performance of the aluminum industry has formed a strong support to the aluminum price in terms of fundamentals. Since April, aluminum production has maintained a growth rate of more than 12%. Even if it enters the off-season of traditional consumption in July, the growth rate of aluminum is still more than 14%. Coupled with the halving of waste aluminum imports, the domestic prices of waste aluminum and primary aluminum have been upside down for a short period of time. as a result, the social inventory of electrolytic aluminum has dropped from this year's high of 1.67 million tons to 700000 tons, and the consumption off-season has not formed a large-scale accumulation. The proportion of aluminum to water increases, the statistical inventory of aluminum bars is low, and the processing fees of aluminum bars remain stable, which further reflects the strong apparent consumption and restricts the increase of aluminum ingot inventory. The impact of the epidemic has changed the consumer-side pattern, and the traditional mainstream aluminum consumption industry has been greatly impacted. Domestic real estate completion, automobile production and marketing, and the three major household appliance industries have not yet returned to the level of the same period in previous years, but the overall trend of development is good. The export market has had a great impact, and the export volume has dropped by more than 20%. Although there are still bright spots such as aluminum furniture and new infrastructure in the growth of aluminum consumption, the consumption base is small, and there is a blind spot in consumption, so the apparent consumption exceeds expectations, so it is necessary to pay attention to whether all aluminum is consumed or converted into invisible inventory as a reservoir. Social inventory is an intuitive response to apparent consumption, so it reflects a more important low in judging the direction of short-term aluminum prices.

Arbitrage analysis

At present, the social inventory of aluminum ingots is about 750000 tons, the inventory of aluminum warehouse receipts is less than 140000 tons, and the inventory of warehouse receipts is at a historically low level, and it used to be the transfer of deliverable capacity, so it is necessary to stabilize production for one year before you can apply for registration of a new delivery brand, so it is difficult to increase the supply of deliverables in the coming year. If the peak consumption season comes as scheduled, social inventory will further decline, and the spot market supply tends to be tight, the situation of overcrowding will not be ruled out, and the monthly price difference of Shanghai Aluminum will maintain the rising water structure in recent months. At present, the price difference of the October 11 contract is about 170 yuan / ton, which is of sustainable concern. The layout can be considered after the price difference falls.

The expectation of the peak season of domestic consumption has not been falsified, the overseas epidemic situation has not been effectively controlled and there is a rebound trend, the overseas consumption situation may remain L-shaped, there are no signs of U-shaped reversal, and the US election has not yet been launched, there may not be new stimulus policies before then, so the pattern of internal strength and external weakness will continue. At present, except for the exchange rate ratio of Shanghai Aluminum is close to 1.17, the original aluminum import window has been opened since May, and now it is still on the edge of import profit, the internal and external positive sleeve is still in a state of loss, and it is still mainly wait-and-see in the short term.

To sum up, from the perspective of apparent consumption and market sentiment in the short term, there is a strong support for aluminum prices at 14000 yuan / ton, and light positions can try to find bargains much short. according to the poor performance of social inventory in early September and signs of marginal tightening of macro policy, or it is difficult to further relax, the abundance of liquidity has raised inflation expectations, but it has been difficult to pull inflation for a long time, and there is still pressure for aluminum prices to hit record highs. Intertemporal positive sets of sustainable attention, internal and external positive sets still need to wait.

Concerns:

1. Domestic consumption

2. Macro policy changes

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