2017 Aluminum Market Trend Review
At the beginning of 2017, Shanghai and aluminum ended the end of the 2016 ups and downs began to rise steadily. Supply side structural reform in the non-ferrous industry, especially electrolytic aluminum industry began to root, but downstream demand is weak, the aluminum price has brought 6 months of horizontal plate. In the meantime, inventories have been accumulating.
2017, the downstream demand for aluminum is not very bright. The housing boom and tepid car manufacturing have failed to bring large increases in demand for aluminium. Supply-side structural reforms have begun to “slim” the electrolytic aluminum industry, which has long been surplus. Shandong, Shanxi, Hebei and other provinces began to eliminate, shut down the tide of backward production capacity, the disk is therefore subject to a long fund of extra attention. Only half a month in August, the panel has soared nearly 1800 yuan, contracted nearly half of the year’s gains.
After this, the beginning of the accumulation of high inventory began to be used for the panel, in the slow delivery and inventory growth has been creating new highs under pressure, the disk surface again began to collate. The trend of the year-round Shanghai aluminum is like a two-level step, slow and determined to continue the 2016-year bull market.
As in the case of Shanghai and aluminum, in 2017, the aluminum also maintained a year-round upward trend of turbulence, and slightly larger, especially since September, the trend is stronger than the continued weakness of Shanghai and aluminum. In addition to the dollar index, which has been on the rise since September, the demand for both inventory and downstream is much smaller than the internal pressure. Therefore, the pace of the continued strength of the plate will be a lot firmer.
Present situation and trend of raw aluminum supply end in China
The original aluminum industry chain from the upstream view is not long, from the mining of bauxite to the smelting of alumina, and finally to the production of electrolytic aluminum, these three important links constitute the original aluminum upstream industry chain. From the reserves of bauxite, although China’s bauxite reserves are not low, but bad taste, so still perennial dependence on imports. In addition, the supply side structural reform from last year to reduce production capacity, the overall original aluminum upstream industrial chain has formed a greater repression.
Bauxite imports continue to increase
According to the latest customs data, August 2017 China’s bauxite imports of about 6.53 million tons, the chain Rose 6.3%. 1 ~ August, imports amounted to about 44.6 million tons, a significant increase of 34.4%.
In August, Guinea remained China’s largest source of bauxite, supplying about 2.78 million tonnes, a small 2.3% increase in the chain. The second is Australia, the supply of about 2.31 million tons, the chain increased by 17.2%. From 1 to August, the supply of bauxite in Guinea and Australia, respectively, was about 17.7 million tonnes and 16 million tonnes, up 175.6% and 14.6% from a year earlier.
In the third quarter, Guinea’s bauxite supply was below 3 million tonnes per month, affected by the rainy season in Guinea. Starting in October, the monthly supply is expected to recover to 3 million mesh million tons. Due to shortages of bauxite in Henan and Shanxi, local alumina plants began to consider the use of a water bauxite imported from Australia.
In August, Malaysia exported to China about 550,000 tons of bauxite, the chain fell 15.6%, the Brazilian bauxite supply of about 527,000 tons, the chain increased significantly 96.1%. The month, affected by the rainy season, India exports only about 55,000 tons of bauxite to China, a sharp 65.8% reduction in the chain. India’s exports of bauxite are expected to resume in October, when the rainy season has gradually ended. At the beginning of August, Kuantan, Malaysia, halted bauxite exports and was expected to resume in mid-October. Affected by the drought and water shortage in Brazil, the local bauxite mine was blocked by the end of September, and the annual production of the Four seasons could be significantly reduced and affected exports. It is reported that the local large-scale mining main MRN this year, bauxite production is expected to reduce about 2 million tons, to 15 million tons.
7 ~ August, Indonesia total exports three ships to China bauxite, about 150,000 tons. By the end of September, a total of four local miners had obtained export quotas amounting to about 10 million tonnes. The supply of bauxite in Indonesia will continue to recover in the next few months.
In the year to come, not only the import of bauxite has been rising, but also the price of bauxite is rising, which indicates that upstream demand stimulation from downstream metal-aluminum prices is continuing to work. In the next 2018 years, with a modest increase in downstream demand, the amount of bauxite imports is expected to be slightly upward.
Continuous strength of alumina to bring cost support to original aluminum
The latest data show that September, the national alumina production of 6.0493 million tons, the month of the year-on-year growth of 9.5%; January-September, the national alumina production cumulative 54.8609 million tons, cumulative year-on-year growth of 16.6%. China’s total alumina imports were 275385 tonnes in September, up 93% from a year earlier. China’s total alumina imports were 2.23 million tonnes in January-September, up 2.96% from a year earlier. In addition to Australia, the main sources of Chinese alumina imports include Indonesia, Vietnam, France, India, Japan and Germany.
From the domestic production of alumina and the growth of import volume, it can be seen that the main increase comes from domestic alumina production. And the most important reason is 2016 years since the price of alumina continued to rise, by the end of October, the market mainstream price of 3590 yuan ~3850 yuan/ton, monthly average price rose 185 yuan/ton, the rise of 5.23%. At the same time, Chinalco’s listing price rose to 3690 yuan ~3850 yuan/ton, the increase of 6.5%. Domestic alumina prices continue to rise, but the gains have narrowed significantly. Throughout the year, the price fluctuation shows the trend of electrolytic aluminum cost-raising, the next 2018 years, Alumina still has the upside space, but will slow the rally.
The import price difference of raw aluminum expands to boost the annual import
In 2017, with the continued strength of aluminum prices, the original aluminum imports have been a certain degree of boost, compared with the 2016-year slump shows a significant increase in the situation. January-September, China’s cumulative imports of aluminum 97484 tons, the year-on-year rise of 27.78% in 2016. From the year-round fluctuations, the second half of the growth is more obvious, and the price difference between the internal and external expansion of China’s aluminum and aluminum imports also increased, but with the import spot spreads continued to shrink in recent months, four quarters of the import volume is not optimistic.
Raw aluminum production continued to shrink in the second half
According to the latest figures, China’s original aluminum production in October was 2.55 million tonnes, down 7.5% per cent from a year earlier, and in January-October, China’s original aluminium production totaled 21.727 million tonnes, up 1.5% from the same period last month. From the year-round data, the output of the second half is significantly reduced, due to the supply-side structural reform in the electrolytic aluminum industry caused by the landing of a large number of capacity shutdown. Aluminum alloy production, in addition to the June data show a sharp rise, the year-round trend is more stable, which also shows that this year the real estate industry growth slowed down, the original aluminum downstream demand is more insipid. In the long run, with the development of the economy, the raw aluminum demand will remain steady growth, but the lack of bright spot in the short term makes the demand for future growth is not optimistic.
The latest data show that as of the end of October, China’s aluminum smelting enterprises built capacity of 45.777 million tons, operating capacity of 36.628 million tons, production capacity of 80.01%, compared with September down 0.18%. According to the provincial accounting capacity operation rate has fallen: Shanxi 1.63%, Henan 1.56%, Inner Mongolia 3.13%, Guangxi 3.74%, Shandong 0.08%; the accounting capacity of the increase in operating rate is: Guizhou 5.6%. Illegal electrolytic aluminum production capacity has been basically shut down, but the heating season limited to put on the agenda, Shanxi and Henan region first implementation, and compliance electrolytic aluminum new investment, electrolytic aluminum industry scale continues to expand.
From the perspective of the year, June is the watershed, the national electrolytic aluminum total output can remain stable throughout the year, in production capacity in June to reach the highest peak, after the beginning of continuous reduction, electrolytic aluminum start rate trend is the same trend. The new compliance capacity has been put into operation at the same time, a large number of outdated production capacity has been eliminated, the supply side structural reform in the non-ferrous industry rooted in the germination. Next year’s production capacity is expected to remain high, the shutdown, the elimination of backward production capacity will further deepen the work.
On the other hand, new capacity is expected to reach 3.81 million tonnes in 2017. In the four quarter, there are still more new production can be further put into production, incomplete statistics, four quarters of about 3.15 million tons of capacity will be in production, in 2018 there are plans to launch 2 million tons. Therefore, under the two-party game, the final winner will be the biggest uncertainty next year.
The global trend of raw aluminum inventories has been differentiated
In the 2017, the global aluminum stock appeared diametrically opposed to the trend. On the one hand, the stock continues to decline in the aluminum, on the other hand, Shanghai aluminum inventory constantly create new highs.
This also shows that from a global point of view, the aluminum market has a small supply gap, but at home is still in surplus situation. Especially with the increase of aluminum price and new production capacity, the production of aluminum has formed a booster.
From the historical data point of view, go to inventory time period is generally in April-July each year, in large-scale domestic to go to inventory before the start, the expected electrolytic aluminum production capacity shutdown, integration will continue to continue. On the other hand, the increase in the proportion of aluminum to reduce the flow of aluminum ingot to 40% of the annual output, so that the aluminum absolute inventory value changes in the futures of aluminum ingot price will be exacerbated.
Consumption situation and forecast of raw aluminum downstream in China
Real Estate industry development slow-down
January-October, commercial housing sales area of about 1.303 billion square meters, year-on-year growth of 8.2%, growth rate than 1 ~ September fell 2.1%. Among them, the residential sales area increased by 5.6%, the office sales area increased 28.2%, commercial business premises sales area increased by 21.4%. Commercial housing sales 10.299 trillion yuan, growth 12.6%, the growth rate fell 2%. Among them, residential sales growth of 9.6%, office sales growth of 20.2%, commercial business sales increased by 27.9%.
In October 2017, the real estate development boom Index (the “National Housing Boom Index”) was 101.49, up 0.04 points higher than September. According to statistics released by the National Bureau of Statistics, the real estate development investment from the completion of the situation, 1 ~ October, the National Real estate development investment 9.0544 trillion yuan, year-on-year nominal growth of 7.8%, growth rate than 1 ~ September fell 0.3%. Among them, residential investment 6.1871 trillion yuan, growth 9.9%, growth rate fell 0.5%. Residential investment accounted for 68.3% of the real estate development investment.
The 2017 real estate industry slowed sharply in comparison with last year, but remained slightly higher than in 2015. Under the macro-policy to the real estate industry bubble regulation, the 2016 economic growth “main engine” flameout, began a long and gentle road of development. As a result, in 2017, the main demand for aluminum has lost its bright spot, the overall demand tepid. 2018, the real estate industry for the demand for aluminum will continue to be mainly stable growth, large-scale construction and development will be transformed into an orderly promotion of local transformation, the demand for aluminum materials to rely more on infrastructure.
Car manufacturing will continue to grow steadily
According to the latest statistics from the China Automobile Industry Association, car sales in October 2017 were slightly lower than in September. January-October, car production and sales to maintain a small growth, but year-on-year growth rate compared with the previous September slightly fell. October the month of the car production and sales respectively completed 2.604 million and 2.704 million units, production and sales decreased by 2.5% and 0.2%, respectively, year-on-year growth of 0.7% and 2%. January-October, the car production and sales completed 22.957 million vehicles and 22.927 million vehicles respectively, year-on-year growth of 4.3% and 4.1%, lower than the same period last year 9.5 and 9.7%. The cumulative growth rate of production and sales decreased by 0.5 and 0.3% respectively compared with January-September.
From the year-round situation, the overall production and sales volume is growing, but the growth rate fell sharply. And from the sub-item data, passenger car January-October output growth 2.3% year-on-year, commercial vehicle January-October output rose 16.9%. After the implementation of the new transport regulations last year, greatly improved the production and marketing of goods vehicles. Car sales will continue to grow steadily in the future, and new energy vehicles will be a bright spot for growth.
Appliance manufacturing becomes the new bright spot of aluminum demand
Since 2017, the home appliance industry has maintained a more stable growth, and into the September, the growth rate has accelerated. planing to seasonal factors, the downstream home appliances consumption capacity has always been increasing, which also provides a strong market potential for aluminum consumption. The next year, household appliances will continue to spend a certain amount of growth, but the magnitude will not be too fierce.
Demand for recycled aluminum will grow steadily
September 2017, China imports 182,700 tons of scrap aluminum, the import amount of 246.971 million U.S. dollars. January-September, the cumulative imports of scrap aluminum 1.5934 million tons, compared with the same period last year growth of 14.2%, the cumulative import amount increased by 25.6%. As the price of raw aluminum has been rising this year, and its replacement relationship with the increasing demand for scrap aluminum, the price of natural also rose, is expected to follow the return of the original aluminum prices, the price of aluminum scrap next year will also slow the rally. Import volume steady growth, the growth rate slightly down.
Future outlook
2017 Shanghai aluminum compared to 2016 performance is more insipid, at the beginning of the transport problem eased after the panel rational fall back, and then as we expected last year, the same wide-spread shocks. In full swing to production capacity, real shutdown, so that electrolytic aluminum production has appeared inflection point. The second half of the declining output brought about by the rising price of aluminum, speculative funds at this time frenzied influx, the Shanghai aluminum pushed on the 17,000 yuan/ton. At this time, a large number of hedge funds also poured into the disk, Shanghai and aluminum began a few months of peak game.
2017, for the electrolytic aluminum industry is a love-hate interwoven year, production capacity has been removed 3 million tons, but the industry profit increased more than a few times. The inventory of aluminum ingots has also been hitting the highest point in history. In the face of the downstream demand is still no bright 2018, supply-side tightening will begin after the heating season to relax, and cost support will be the key to the strength of aluminum prices. In addition, the continued production of advanced production capacity will also usher in a cluster of return on investment, 2017 electrolytic aluminum supply will be a tight balance changes.
Overall, the first quarter of next year, will continue to supply a 2017-year pattern of tightening, and after the end of the heating season, especially the second half will usher in the gradual release of production capacity, superimposed downstream demand lack of bright spots, macroeconomic development, and the U.S. dollar big probability rise, and other unfavorable factors, the trend of Shanghai and aluminum will appear first after the suppression, the whole year wide shocks situation , the main operating range throughout the year is estimated at 12,800 ~1.68 million/ton.