After the Spring Festival, the price of aluminum in Shanghai showed a downward trend. In March, the weak situation of aluminum in Shanghai has not improved. The futures price has fallen from the high of 19,500 before the Spring Festival to around the 18,000 line. At present, there is not much contradiction in the fundamentals of aluminum, and the reduction of production on the supply side has formed a bottom for the price, but the demand recovery is limited, the upward drive is insufficient, and there are many macro uncertainties. Affected by overseas risk events, the macro bearish logic dominates the recent trend of aluminum prices. weak.
Overseas banks have been thunderstormed one after another, and the market's risk aversion has risen
The collapse of Silicon Valley Bank had a great impact on the non-ferrous metal market, and then the crisis spread to Europe. Credit Suisse suffered a thunderstorm due to financial reporting problems and the inability of major shareholders to provide assistance. Due to the larger scale of Credit Suisse, it has a greater impact on the market than Silicon Valley Bank The market is also worried that there will be another big bank to go bankrupt. The risk aversion sentiment in the market has risen rapidly, the US dollar index has risen, and industrial products have been particularly affected. Immediately afterwards, the First Republic Bank of the United States faced a crisis, but 11 major Wall Street banks jointly rescued it, which significantly boosted market sentiment and the US dollar index fell back.
Bank of America's thunderstorm is mainly due to the Fed's sharp interest rate hike. Take Silicon Valley Bank as an example. During the epidemic, the Federal Reserve started to cut interest rates. The bank hoarded a large amount of cash, and most of its funds were allocated in treasury bonds and MBS bonds. After that, the inflation in the United States was high. In 2022, the Federal Reserve began to raise interest rates frantically, and the interest rate was raised to 5%. , while the interest rate of long-term bonds held by Silicon Valley Bank is only 1.5-2%, and they have to sell at a reduced price, resulting in book losses of assets. The bonds in the bank, so the run began, and the low-interest bonds were not easy to sell, so the liquidity of Silicon Valley Bank deteriorated rapidly, and the speed of light collapsed.
U.S. banks have lent a total of $164.8 billion from the Federal Reserve through two credit facility facilities a week after the Silicon Valley Bank crash, underscoring the growing strain on funding following the collapse of Silicon Valley Bank. The Fed is now facing a dilemma. The left-handed economy and the right-handed inflation need to be further observed.
limited cost support
In February, the cost of electrolytic aluminum weakened mainly due to the fall in coal prices. The price of thermal coal fell in the first half of the year but rebounded in the second half of the year. In addition, the price of alumina rose during the cost accounting cycle, but it was difficult to resist the decline in anode costs. According to Mysteel's survey and calculation of electrolytic aluminum enterprises across the country, the weighted average full cost of China's electrolytic aluminum industry in February 2023 is 16,983 yuan/ton, a decrease of 286 yuan/ton from the previous month.
At present, thermal power is the main source of electricity for domestic electrolytic aluminum plants. Although the proportion of hydropower is increasing year by year, the proportion of thermal power is still relatively large. In addition, the cost of electricity is the most important cost in the production cost of electrolytic aluminum, accounting for Between 30-40% of the production cost, so the price of coal electricity has a certain influence on the trend of aluminum price. Previously, due to high inventory and consumption gradually entered the off-season, coal prices had fallen continuously before, and cost support collapsed, dragging down aluminum prices. However, affected by the mining accident and the stricter safety inspections of the two sessions, the overall supply is tight, the inventory of coal mines is low, and coal prices have stopped falling and corrected. However, the current social inventory remains at a high level, coupled with the traditional off-season of coal consumption, it is expected that coal prices may fluctuate slightly in March, and the cost support of aluminum prices is limited.
The current situation on the supply side is basically stable
In January and February this year, new capacity in Gansu province came on stream, and smelters in the southwestern region, including Guizhou, Guangxi and Sichuan, also ramped up production, although the resumption of production has been slow. Due to the tight power supply, Yunnan Province asked local aluminum producers to further reduce electricity consumption in February this year. There is no timetable for the duration of the power cut. Some production in Yunnan has been shut down in accordance with local requirements, and the current operating capacity is only 60% of the total.
However, the current decline in production capacity has not yet been reflected in output, and aluminum output has still increased. The main reason is that although the news of Yunnan's production reduction has gradually come to fruition, the previous enterprises concentrated on pumping aluminum water to cast ingots, and the overall output release was strong, which did not match the operating capacity. There has been a significant decline. The National Bureau of Statistics released a report showing that China's primary aluminum (electrolytic aluminum) output from January to February was 6.74 million tons, an increase of 7.5% year-on-year. Entering March, the impact of the early production reduction in Yunnan and other regions will gradually be reflected. There are new production resumes in Sichuan, Guizhou, Mongolia and other places. The power cut in Yunnan is affected by the lack of local water supply. It is expected that before the flood season, it may be difficult for local refineries to resume production on a large scale. Therefore, the supply side has certain support for the lower aluminum price.
The operating rate of downstream processing enterprises rebounded, paying attention to the recovery of demand in the later stage
After the Lantern Festival, the downstream will resume work one after another, and the operating rate of processing enterprises has picked up. After the sharp drop in aluminum prices, the downstream is actively replenishing the inventory, and the demand is concentrated. At present, consumption is still in the post-holiday recovery period. Although the market is more optimistic about demand recovery expectations, it will take time to fully recover, and short-term support for prices is limited.
Specifically, the real estate industry has picked up, but the overall operation is still at a low level. Judging from the latest data released by Social Finance, the new medium and long-term loans of residents in February were 86.3 billion yuan, an increase of 132.2 billion yuan compared with the same period last year. Due to the impact of the dislocation of the Spring Festival, if the data from January to February are combined, the medium and long-term loans of residents have decreased by 387.1 billion yuan compared with the same period last year, indicating that the current property market continues to operate at a low level, and the extent to which aluminum demand will recover in the future remains to be seen. , if the good transmission of the terminal can continue, it is expected to give upward support to aluminum prices.
In the auto industry, affected by the decline of new energy subsidies and the upcoming full implementation of China VI B emission standards in July, the auto industry may enter the "involution" stage this year. With the joint efforts of policies, it is expected that the auto sales data will be relatively optimistic in the short term. However, the increase in orders caused by this round of price cuts transmitted to the secondary aluminum alloy ingot industry chain needs further tracking and verification. What is certain is that market confidence is encouraged and a certain amount of demand increase can be brought in the short term. According to the China Automobile Association, the national automobile production and sales in February reached 2.032 million and 1.976 million respectively, an increase of 27.5% and 19.8% month-on-month and an increase of 11.9% and 13.5% year-on-year.
The inflection point of the social bank has appeared, but it is still at a relatively high level
Affected by the increase in supply and the off-season of demand before the festival, inventory began to accumulate. After the Lantern Festival, demand gradually recovered, and the growth rate of aluminum ingot stocks gradually slowed down. At present, the inflection point of aluminum ingot stock has appeared, but it is still at a relatively high level, according to SMM statistics It shows that the domestic social inventory of electrolytic aluminum ingots was 1.173 million tons on March 20, a decrease of 38,000 tons compared with last Thursday's inventory, an increase of 109,000 tons compared with the historical inventory of the same period in March 2022, and a cumulative decrease of 96,000 tons compared with the beginning of March.
Since mid-December last year, aluminum inventories in Shanghai have also entered the stage of accumulation. It has increased for 13 consecutive weeks and set a new high in nearly a year. However, the recent increase has slowed down significantly, and an inventory turning point may appear. Lun aluminum stocks fluctuate in a wide range and are still at a relatively low level.
On the whole, recent overseas liquidity risk events have continued, European and American banks have broken out risk events one after another, market risk appetite has fallen, aluminum prices are temporarily dominated by macro sentiment, and Shanghai Aluminum once dropped below the 10,000-eight mark. Although overseas sentiment is unprecedentedly pessimistic, the domestic macroeconomic environment is relatively good. Under the boost of domestic economic recovery expectations, the recovery of aluminum demand is still good. The price boost is limited, and the impact of supply-side Yunnan production cuts on prices has weakened in the short term. There is not much contradiction in the fundamentals. The macro-pessimistic atmosphere of Shanghai Aluminum fluctuates at a low level. Follow-up observations will be made on the actual power performance in the Southwest Feng water season, the progress of demand improvement, and the Fed's interest rate hike.
