Aluminum prices remained strong in October, showing a strong performance. According to the Commodity Market Analysis System of Shengyi Society, as of October 24, 2024, the average price of aluminum ingots in the East China market in China was 21090 yuan/ton, an increase of 5.56% from the market average price of 19980 yuan/ton on September 26.
At present, the rise in aluminum prices is mainly due to the upward shift of the cost center, which drives the rise of the industrial chain market. Merely considering the supply and demand side is not enough to support the current price. In the short term, aluminum prices are supported by cost factors and have a strong trend, but the upward space has narrowed and the risk of decline has increased. The future market is mainly cautious and optimistic. The reasons are as follows.
Short term risk points: The favorable fundamentals of alumina have already been reflected in prices, and even the price of alumina has exceeded expectations with an excessive rise. Currently, the profit window for alumina exports is gradually closing, and due to high prices, there will be more production capacity in the future, and long-term excess pressure will gradually emerge; The risk of alumina price pullback has increased, and the cost support risk of aluminum ingot prices has intensified.
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. The terminal demand is not optimistic.
The excessive rise in alumina prices has intensified the risk of cost support
The recent trading logic of alumina prices: In September, Guinea’s bauxite imports experienced a significant month on month decline due to the impact of the rainy season on shipments; Domestic mines (environmental interference affecting bauxite production capacity in Zhengzhou area) have tight supply at the mining end, and spot alumina is also tight in the short term.
However, dynamically speaking, there has been a significant improvement in the supply from the mining end. Based on recent weekly shipping data from Guinea, there has been a significant increase in bauxite transportation volume, and it is expected that the arrival volume in October and November will significantly increase. At present, domestic alumina enterprises mainly using imported minerals still have high operating rates, and the tight supply at the mining end has not brought the expected risk of production reduction.
There is also an expected increase in domestic spot supply of alumina. A large alumina plant in Shandong has put into operation a 1 million ton production line this month, with an expected product release date of the end of October or early November. The production situation of new production capacity on the spot side of alumina may be mainly affected by the relocation of 2 million tons of production capacity by Weiqiao Group in the fourth quarter. It is expected that the first batch will be discharged in early November, and the second batch is highly likely to be discharged at the end of November or early December. There is also a production capacity of 2 million tons for Guangxi Huasheng Phase II, with the first batch expected to be put into operation by the end of December and the second batch expected to be put into operation by the end of January 2025.
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