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High Profits Drive Aluminium Smelters to Stick to Output Increase Plans

iconMay 11, 2022 10:42
Source:SMM
SHANGHAI, May 11 (SMM) –Macro: (1) The National Development and Reform Commission and the Ministry of Commerce plan to revise the Catalogue of Industries Encouraged for Foreign Investment, continue to encourage foreign investment in the manufacturing industry, and add or expand items such as components, parts, and equipment manufacturing in the National Catalogue. (Bullish factor ★)

SHANGHAI, May 11 (SMM) –

Macro:

The National Development and Reform Commission and the Ministry of Commerce plan to revise the Catalogue of Industries Encouraged for Foreign Investment, continue to encourage foreign investment in the manufacturing industry, and add or expand items such as components, parts, and equipment manufacturing in the National Catalogue. (Bullish factor ★)

Dong Huajie, director of the central bank's treasury bureau, said on May 10 that the People's Bank of China has accelerated the pace of turning over profits to the Ministry of Finance, and has paid 800 billion yuan of profits to  the Ministry of Finance so far this year, equivalent to RRR cuts of 0.4 percentage points. (neutral)
Fundamentals:

According to SMM estimates, the weighted average full cost of aluminium smelters in China remained at 17,320 yuan/mt in April. 35% of the operating capacity saw their costs above the average cost, and 2.6% of the operating capacity saw their costs above 19,000 yuan/mt, mainly distributed in Guangxi. ( neutral)

According to the CPCA, the retail sales of new energy passenger vehicles reached 282,000 units in April, a year-on-year increase of 78.4% and a month-on-month decrease of 36.5%. In April, the domestic penetration rate of new energy vehicle retail sales reached 27.1%. (neutral)
Spot market: Spot discounts in east China remained at 30 yuan/mt amid increasing supply and weak demand caused by the pandemic.


Summary

The costs of aluminium smelters remained at 17,320 yuan/mt in April. Despite recent drop in aluminium prices, smelters still have profits at present. As such, smelters may maintain their output increase plans in the near future. Therefore, SMM predicts that the short-term aluminium prices will remain weak and volatile.

Spot
SMM

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