Recently, due to the geopolitical situation, European spot electricity prices rose again to more than $300 / megawatt in the off-season, and it is expected that the closed capacity of European aluminum plants is less likely to resume production this year. In addition, the higher price of the new contract may also prompt electrolytic aluminum companies to cut production as the electricity contracts of unstopped aluminum plants in Europe expire. It is estimated that 100000-250000 tons of electrolytic aluminum production capacity in Europe is still at risk of reducing production this year.
In 2021, the cash cost of the 90 per cent quantile of global electrolytic aluminium capacity rose 25 per cent year-on-year to $2100 a tonne due to rising fossil energy costs. In 2022, as fossil energy prices continue to rise and alumina prices rise, the cash cost of the electrolytic aluminum industry will rise further.
The acceleration of the resumption of production by domestic electrolytic aluminum enterprises will partially make up for the risk of supply reduction in Europe and Russia. Due to the high profits of domestic electrolytic aluminum and the support of power grids in some areas, the recent resumption of electrolytic aluminum production has been accelerated, and domestic resumption and new production capacity may begin to release production in the second quarter.
Changes in short-term trade flows and local supply and demand gaps will boost seaborne alumina prices. Seaborne alumina prices are still likely to rise in the second quarter, prompting domestic enterprises to increase alumina exports. Considering that a total of 6 million-8 million tons of new alumina production capacity is planned to be put into production in China and Indonesia this year, when the profit is high, the capacity utilization rate can still be improved or even overproduction, so it is difficult to have a large gap in global alumina supply.
It is expected that in 2022, domestic and overseas electrolytic aluminum production will increase by 3.9% and 2.1% respectively compared with the same period last year, and the total output growth rate will be lowered to 3.1%. The gap between global supply and demand widened to 1.63 million tons from 1.12 million tons in 2021. Although domestic electrolytic aluminum enterprises resume production earlier than expected, it is expected that domestic electrolytic aluminum imports will remain low this year, there is a gap between domestic electrolytic aluminum supply and demand, and social inventory will be maintained in the historical seasonal range.
