Aluminum prices remain firm in October
Aluminum prices remained strong in October, showing a strong performance. According to the Commodity Market Analysis System of Shengyi Society, as of October 21, 2024, the average price of aluminum ingots in the East China market in China was 20803.33 yuan/ton, an increase of 4.12% from the market average price of 19980 yuan/ton on September 26.
Strong alumina prices and strong cost support
The supply of raw alumina is tight and the price is high. The limited domestic mining has led to a slow progress in the resumption of alumina production (due to environmental interference with bauxite production capacity in Zhengzhou area), coupled with export problems faced by Guinea bauxite overseas, resulting in tight supply at the mining end, making it difficult for the alumina production rate to continue to rise. The price of alumina has risen rapidly and is relatively high, providing strong cost support for aluminum prices.
Macro positive release policies boost aluminum prices
Domestic macroeconomic benefits are gradually being released, and policies are boosting the non-ferrous sector. The central bank has proposed further interest rate cuts and reserve requirement ratio cuts to release liquidity, while also creating a shift towards refinancing to guide listed companies to repurchase and increase their holdings of stocks. At the real estate level, it is proposed to lower the interest rates of existing housing loans and unify the minimum down payment ratio for housing loans. Vice Minister of Finance Liao Min: We will actively study and introduce measures that are conducive to the stable development of the real estate industry. Make good use of special bonds to acquire existing commercial housing and use it as affordable housing in various regions. We are urgently studying and clarifying the value-added tax policy that links the standards for ordinary and non ordinary residential properties.
On October 21, the People’s Bank of China authorized the National Interbank Funding Center to announce that the loan market quotation rate (LPR) on October 21, 2024 was 3.10% (3.35% before) for 1-year term and 3.60% (3.85% before) for 5-year term and above, both of which were 0.25 percentage points lower than before.
With the gradual implementation of favorable domestic policies and the directional guidance of policies, market confidence has returned.
The destocking status supports aluminum prices
The social inventory of aluminum ingots is in a continuous state of destocking. As of October 21, the mainstream domestic market’s social inventory of aluminum ingots was 627000 tons, down 19000 tons from 646000 tons on September 30; Compared to 673000 tons on October 8th, 46000 tons have been destocked.
On the supply side, Yunnan electrolytic aluminum enterprises have high daily production, and the upward space has narrowed. However, recently, Southern Power Grid announced that Yunnan electrolytic aluminum may lift power restrictions this winter and next spring, and downstream electrolytic aluminum in Yunnan is expected to not reduce production in the fourth quarter; Multiple downstream sectors on the demand side have experienced a rebound in operating rates, with electrolytic aluminum and aluminum rod inventories both experiencing slight destocking.
Future expectations
The upward shift of the cost center has driven up the reasonable price of aluminum. In the short term, aluminum prices are supported by cost factors, with a strong trend that is easy to rise but difficult to fall, but the upward space has narrowed.
Medium – and long-term risk points: Import and export may be affected by foreign policy factors, and some of the US 301 tariff policies will take effect on September 27th. This includes a 100% tariff on Chinese electric vehicles, a 50% tariff on Chinese solar cells, and a 25% tariff on Chinese steel, aluminum, electric vehicle batteries, and key minerals.
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