Where will Russia's plan to abolish aluminum export tariffs and increase the global supply of aluminum prices?

Recently, Russia's expectation of abolishing aluminum export tariffs and increasing global supply has attracted the attention of the industry. As early as October 18, Russia's Interfax news agency reported that the Information Office of the Russian Ministry of Economic Development said that the Subcommittee on tariff and non-tariff Supervision supported the reduction of export tariff rates on aluminum alloys to zero.

According to related reports, the decision to abolish aluminum export duties applies to Russian aluminum company (Rusal). Rusal is the world's largest aluminium supplier outside China, accounting for 6 per cent of last year's global supply of 65 million tonnes. Russia imposed a 15 per cent export tariff on primary aluminium exports, or at least $254 a tonne, between August and December, but is not expected to extend it after the decision to abolish tariffs on aluminium alloys.

Russia's expectations of scrapping tariffs on aluminium exports and increasing global supply triggered a sell-off, driving down prices on the spot markets in Europe and the US. As aluminium stocks decline, prices are likely to fall further.

The overnight Shanghai Aluminum main 2112 contract opened at 19780 yuan / ton, the highest point was 19815 yuan / ton, the lowest point was 18750 yuan / ton, and closed at 18885 yuan / ton, down 1075 yuan / ton from the previous close, down 5.39%. On Thursday, Lun Aluminum opened at US $2680.5 per tonne and closed at US $2553.5 per tonne, down US $132.5, or 4.93 per cent, from the previous close.

"Click to view the real-time price of Shanghai aluminum futures.

In terms of domestic spot, Shanghai Aluminum continued to compete around the 20000 yuan / ton mark in early trading yesterday. It is worth noting that this Thursday, the stock of domestic electrolytic aluminum society accumulated 31000 tons, and 24800 tons of aluminum rods were removed from the warehouse. The inventory pressure in East China is still there. However, the inventory of aluminum bars and ingots in Foshan has both dropped, which has also contributed to the opening of the price gap between regions in the current trend of aluminum prices. The discount in East China continues to maintain shock finishing around 110yuan / ton in early trading. The average price of a family is concentrated at 19950 yuan / ton, with a discount of 100 yuan / ton from the Central Plains to East China and 110 yuan / ton from Foshan to East China.

"Click to view the spot price of aluminum.

Fundamentals:

(1) on November 4th, SMM counted 1.013 million tons of domestic electrolytic aluminum social inventory and 31000 tons of weekly storage (negative).

(2) the survey on the start-up of leading enterprises downstream of SMM shows that due to the mitigation of the impact of power cuts, the operating rate of the sample has increased by 1.7 percentage points to 65.8% (Lido).

(3) on November 3, the daily output of coal reached 1.171 million tons, a new all-time high.

Summary:

(1) on the supply side, Russia will eliminate the expectation that aluminum export tariffs will lead to an increase in global supply, which will directly lead to a fall in Yangshan aluminum premium and overseas spot prices.

(2) on the demand side, downstream consumption continues to recover due to the gradual easing of the impact of power and production restrictions, but it is still not enough to support the conversion of social aluminum ingot stocks to depots. Social aluminum ingot stocks continued to accumulate 31000 tons to 1.013 million tons on Thursday, sparking concerns about the decline in real estate consumption the following year.

(3) spot, East China aluminum ingot inventory pressure, yesterday morning continued to maintain a discount of about 110 yuan / ton, South China aluminum ingot aluminum bar inventory double decline prompted Foshan to East China rising water to about 110 yuan / ton.

Overall, in the short term, the total inventory of aluminum ingots and bars this week is 1.15 million tons, unchanged from last week, and the actual accumulation trend is coming to an end. In the coming week, if the total inventory of aluminum ingots and bars is removed, it may cause a low rebound in aluminum prices.