Under the influence of tensions between Russia and Ukraine, international aluminum prices have reached a 14-year high, and domestic and foreign aluminum prices have been upside down. In the absence of imported aluminum, the domestic inventory is low and the stock is less than expected. Industry insiders mostly reflect that the overall supply and demand structure is still tight this year, and aluminum prices are expected to be high. Listed companies related to the aluminum industry chain are expected to benefit from the rise in aluminum prices.
Conflict between Russia and Ukraine pushes up international aluminum prices
Data show that international aluminum prices rose to their highest level since 2008. At one point, the price of (LME) aluminum on the London Metal Exchange reached $3380 a tonne, close to an all-time high.
The conflict between Russia and Ukraine is an important reason for the continuous rise in the price of electrolytic aluminum in the global market.
Russia is the second largest producer of primary aluminum after China. Liu Xiaolei, director of the big data department of SMM, said that Russia's own production of electrolytic aluminum is more than 4 million tons, and Rusal is also one of the largest aluminum producers in the world, accounting for more than 5% of global production. The rise in aluminum prices caused by US sanctions against Rusal in 2019 has also aroused some concern in the market.
In addition, Russia is also one of the major energy suppliers in Europe. Due to the tension between Russia and Ukraine, Russia has cut off the supply of natural gas to Europe, resulting in the European energy crisis, causing European aluminum smelters to reduce production one after another. as the conflict between Russia and Ukraine intensifies, energy prices continue to soar and the market supply of European aluminum smelters continues to decline.
Liu Xiaolei told the Financial Associated Press that due to tense relations between Russia and Ukraine, the Beixi II project was shelved, which in turn triggered a rise in natural gas in Europe and led to a rise in electricity prices. Many aluminum plants were forced to shut down their production lines, which currently involves nearly eight countries. Production capacity of more than 870000 tons is limited.
Liu Xiaolei further said: "around the fermentation of market sentiment and events, the impact of the conflict between Russia and Ukraine on the market will continue for a period of time."
Domestic supply is tight and aluminum prices remain high
From the perspective of demand, Liu Xiaolei believes: "as production and exports in Europe and Russia may be affected, it may also cause some downstream enterprises in Europe to be forced to turn to Australia, the Middle East, China and other regions for the procurement of electrolytic aluminum or downstream processed products." If you turn to China for procurement, it will also form a certain support for demand. "
"due to the influence of factors such as the European energy crisis, aluminum prices at home and abroad have been upside down. At present, the total price of imported aluminum to Hong Kong is 1500 yuan / ton higher than the domestic aluminum price. The absence of imported aluminum leads to tight supply." Liu Xiaolei said.
After the import window of domestic electrolytic aluminum is closed, there is a certain gap in the supply of domestic electrolytic aluminum. In 2021, China imported 1.58 million tons of electrolytic aluminum, which is equivalent to about 130000 tons per month. Due to the current import losses, this part of the import supply is in short supply.
Domestic aluminum prices have also risen under tight supply. The business manager of Shanghai Shengtong Metal Co., Ltd. told the financial news agency: "during this period, the market has been in a tight state of supply and demand. The price has risen by about 500 yuan / ton in the past two weeks. At present, downstream customers have reflected that the price is higher."
However, there is also some good news on the supply and demand side of the market. From 00:00 on February 21st, most areas of Baise, an important producing area of electrolytic aluminum in China, lifted the "non-essential" control measures and turned to normal epidemic prevention and control. Industry insiders told the Financial Associated Press that in fact, the impact of production in Guangxi is very small, mainly due to the transportation disruption caused by the epidemic, and now it has basically returned to normal.
SMM data show that the current domestic social inventory is about 1.08 million tons, which is at the middle and low level in the same period in history. The inventory is low and the stock is not as good as expected, while the market demand is expected to be good, and the aluminum price remains strong. Liu Xiaolei believes: "from a long-term point of view, there may be two risk points in the market, on the one hand, the Fed's interest rate hike will have a certain impact on commodities, and on the other hand, it is worried about the lack of motivation of domestic real estate consumers." but whether downstream consumption can be supported may not be seen until the second half of the year.
Most of the relevant listed companies will benefit from the rise in aluminum prices.
Most listed companies said they would benefit from a new round of rising aluminum prices caused by strained relations between Russia and Ukraine. Some listed companies believe that their business will be better than in 2021 due to rising aluminum prices, increased demand for new energy vehicles and the development of the recycled aluminum industry.
Electrolytic aluminum production enterprises with high "ore content", such as Aluminum Corporation of China (601600.SH), Yunnan Aluminum Corporation (000807.SZ), Tianshan Aluminum Corporation (002532.SZ), or the main beneficiaries of this round of aluminum price rise.
Among them, Yun Aluminum Co., Ltd. believes that: "generally speaking, this year may be a better year for aluminum prices." Fund managers who have previously participated in the company's research told the Financial Associated Press: "Yunnan Aluminum's capacity release this year should be better than last year, and the tight power supply is expected to ease this year."
Because Tianshan Aluminum is located in Xinjiang, it has received great support in terms of resources and policies. A company official told the Financial Associated Press: "the company implements the order-to-order production of first order and then production, and there is no local production restriction policy. Now the demand is strong and the production capacity is full." At the same time, because the local coal price is cheap and the company owns its own power plant, the production cost is also lower than that in other regions. "the company's own power generation can meet 80-90% of the energy needs," the other side said. "
In addition to electrolytic aluminum production enterprises, processing enterprises in the middle reaches of the industrial chain also said that they would benefit from the rising cycle of aluminum prices. Mingtai Aluminum (601677.SH) told the Financial Associated Press: "the rise in aluminum prices is beneficial to the company. The processing cycle of the company's products is longer. The shipment is calculated on the basis of the average aluminum ingot prices on the same day or some time before. When aluminum prices continue to rise, it is beneficial to the company."
In addition, cloud sea metal (002182.SZ) people also expressed a similar view: "the rise in aluminum prices is good for the company, because the sales method is based on the aluminum price on the day of sale plus processing fees, the inventory portion will benefit." At the same time, the above people said that with the development of new energy vehicles, the company's aluminum alloy automobile structure product market is growing rapidly. "at present, about 10% of cars use aluminum alloy parts, and the proportion may reach 50% in the future."
However, Liu Xiaolei also told the Financial Associated Press: "with the development of the trend, there will be a certain incremental demand for aluminum, but due to the different prices of each model, the amount of aluminum used is different. In the end, the growth of the overall demand for aluminum may be lower than the market expected."
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