Aluminum fluoride prices continued to weaken in June, with the aluminum fluoride market trapped in a pattern of weak supply and demand, a situation unlikely to change in the short term [SMM Analysis]

SMM June 6 Update:

During the May 9 to June 6 period, aluminum fluoride prices continued to weaken. As of now, SMM aluminum fluoride prices closed at 9,630-9,900 yuan/mt, and SMM cryolite prices were quoted at 7,500-9,500 yuan/mt.

On the raw material side, for fluorspar, the current delivery-to-factory price for 97% fluorspar powder concentrated in the 3,200-3,550 yuan/mt range. Throughout the period, the fluorspar market remained sluggish, with intense supply and demand bargaining, and the price center continuously declined. In terms of supply, northern enterprises gradually resumed production as temperatures rose, coupled with a large influx of low-priced foreign trade goods into the market, leading to a significant YoY increase in overall supply, and continuous pressure on the supply side. However, restricted mining and low inventory levels provided some support to the supply side, creating a mixed situation. Demand remained weak, with sluggish end-use consumption, and downstream enterprises generally adopting a wait-and-see attitude, resulting in strong pressure to drive down prices, making market transactions noticeably sluggish. As a result, fluorspar prices accelerated their downward trend. Despite some factors resisting the decline on the supply side, the weak market situation is unlikely to change in the short term, and prices are expected to continue weakening. SMM data shows that the current average delivery-to-factory price for 97% fluorspar powder is 3,367 yuan/mt, a 6.03% decrease from May 9. Meanwhile, the price of another key raw material, aluminum hydroxide, saw a significant increase due to mine-related factors, causing alumina prices to rise rapidly, and the current ex-factory average price for aluminum hydroxide, as tracked by SMM, is 2,131 yuan/mt, a 13.68% increase from May 9. Additionally, high sulphuric acid prices have increased cost support for aluminum fluoride.

The aluminum fluoride market currently exhibits weakness in both supply and demand. On the supply side, since the aluminum fluoride tender pricing was determined in May, product prices have been continuously declining, almost reaching the cost line, significantly compressing profit margins. This has led to decreased production enthusiasm and long-term low capacity utilization rates. The market has adopted a "produce based on sales, cautious production scheduling" strategy, lacking motivation for expansion in the short term, and it is expected that the supply scale will remain low and stable. On the demand side, although there are regional adjustments in the aluminum industry, such as the relocation of Shandong's capacity to the south, the national total capacity remains largely stable, with no significant increase in demand for aluminum fluoride. Downstream enterprises, driven by cost control and market sentiment, generally adopt a procurement strategy that only meets basic needs, making it difficult for demand to achieve breakthrough growth.

Brief Comment: During this period, the June tender pricing for benchmark downstream aluminum enterprises was finalized, and aluminum fluoride market prices maintained a weakening trend. The June benchmark enterprise tender price dropped 150-200 yuan/mt to 9,630-9,700 yuan/mt. The current aluminum fluoride market continues to experience weak supply and demand. After entering June, prices of both raw materials and finished products have declined, and corporate profitability has not improved. Most enterprises are experiencing losses, and it is difficult to increase the low operating rates of enterprises in the short term. Coupled with the absence of positive factors on the demand side, aluminum fluoride prices are expected to remain stable in the short term. Moreover, there is an expectation of a decline in raw material prices in June, and prices are expected to remain relatively weak next month.