The center of gravity of aluminum prices moved down in October
According to the Commodity Market Analysis System of Business Society, on October 24, 2023, the average price of domestic aluminum ingots in the East China market was 18930 yuan/ton, a daily increase of 0.37%. Compared to the beginning of the month (October 1), the aluminum price was 19856.67 yuan/ton, a decrease of 4.67%.
In the long term, the current price is in a sideways range after a high decline. Since May, the price has been fluctuating below 19000 yuan/ton, breaking through 19000 yuan/ton at the end of August. In September, aluminum prices first fell and then rose, and in October, the center of gravity of aluminum prices returned to below 19000 yuan/ton.
Overview of Fundamentals
Loose supply
Supply side: Recently, a certain electrolytic aluminum enterprise in Inner Mongolia has added 200000 tons of production capacity and is gradually entering the production cycle. It is expected to reach full production by December. Electrolytic aluminum enterprises in the southwest region are basically resuming production, and we will pay attention to whether the precipitation in the southwest region in November will once again interfere with production. At present, the wave of resuming production has basically ended, and the overall supply is relatively loose.
The demand side rebounded month on month and decreased year-on-year
In terms of demand: Last week, the operating rate of domestic aluminum downstream processing leading enterprises increased by 1.2 percentage points compared to the week before the holiday to 64.5%, a decrease of 2.7 percentage points compared to the same period last year.
Due to the entry of cables into the industry’s centralized delivery period, the terminal pickup volume has significantly increased, driving a significant increase in operating rates; The operating rates of aluminum strip and aluminum foil plates have slightly increased; The recycled aluminum alloy sector is mainly due to the resumption of normal production and a rebound in operating levels after the holiday, but actual demand has not significantly increased yet. However, only the operating rate of the profile sector has declined, especially the construction profile sector is relatively weak.
Cost escalation
Cost side: The price of raw alumina continues to rise slightly, coupled with the strengthening of coal prices, resulting in an increase in the cost of electrolytic aluminum.
Inventory increased month on month
In terms of social inventory, following the start of destocking in the second half of July, inventory is relatively low. As of October 23rd, the social inventory of mainstream areas of domestic electrolytic aluminum ingots was 630000 tons, with a cumulative inventory of 130000 tons compared to the end of September. Based on year-on-year data, it is close to the 636000 tons in the same period of history after last year’s holiday, and still at a low level in the same period of nearly five years.
LME aluminum inventory: As of October 23, LME aluminum inventory decreased by 2000 tons to 486450 tons compared to the previous trading day.
Future market forecast
Electrolytic aluminum production enterprises mainly maintain stable production and have large operating capacity. Currently, there is a surplus of aluminum ingot inventory after the holiday, and the supply of aluminum ingots is sufficient to suppress aluminum prices. However, the demand in the downstream peak season is partially fulfilled, and the cost support is strong. It is expected that in the short term, the probability of aluminum price fluctuations and sideways operation will increase.
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