Aluminum Processing Operating Rate Is Steadily Increasing, Waiting For The Inflection Point Of Aluminum Ingot Inventory
Guohai Securities recently released a weekly aluminum industry report: aluminum processing operating rates have steadily increased, waiting for an inflection point in aluminum ingot inventories.
The following is a summary of the research report:
Macro: This week (August 5-August 9, the same below) the macro outlook continues to be bullish. The State Council issued the "Opinions on Promoting the High-Quality Development of Service Consumption", and the Shanghai headquarters of the Central Bank held a work conference for the second half of 2024. The war in Russia and Ukraine and the situation in the Middle East showed signs of escalation this week, bringing more variables to the macro situation. The U.S. manufacturing PMI and employment data have weakened, exacerbating the trade recession in the short term, a liquidity crisis in the global market is imminent, and overseas macro sentiments are cautious. Domestic policies to strengthen carbon peaking have been intensively introduced, causing market concerns about the supply side of energy-intensive industries.
Electrolytic aluminum:
On the supply side: With the completion of the resumption of electrolytic aluminum production in Yunnan, the growth rate of the domestic electrolytic aluminum supply side has slowed down. According to SMM data, domestic electrolytic aluminum production in July 2024 (31 days) was 3.683 million tons, a year-on-year increase of 3.22%. As of now, the total operating production capacity of domestic electrolytic aluminum is approximately 43.43 million tons, and the total output in August is expected to increase slightly from the previous month to about 3.69 million tons. Cost: The overall cost of domestic electrolytic aluminum remained stable this week. According to SMM monthly cost data, nearly 12% of domestic electrolytic aluminum production capacity in July had a complete cost of more than 19,000 yuan/ton. Entering August, domestic alumina spot prices remained high and fluctuated, while the costs of other auxiliary materials fell slightly. It is expected that domestic electrolytic aluminum costs will mainly fluctuate within a narrow range in August. When aluminum prices weaken, these high-cost businesses suffer. In terms of import market: the domestic raw aluminum spot import window remained closed during the week, and the import flow in the market remained tight.
Demand: The domestic downstream construction situation is basically stable this week. The operating rate of the aluminum cable industry has further improved, and the operating rate of aluminum profiles and other industries has remained stable. Some aluminum processing enterprises in Henan involving deep well casting have reduced production due to the province's special rectification of production safety, while other areas are temporarily operating stably.
Aluminum processing: In terms of aluminum bar inventory, the destocking of aluminum bars accelerated in mid-week, mainly due to the decline in storage capacity and the rebound in demand. As of August 8, the domestic social inventory of aluminum rods was 122,700 tons. This week, the inventory was destocked by 7,100 tons compared with Monday and 6,700 tons compared with last Thursday. The outbound volume increased by 2,700 tons month-on-month to 44,400 tons. . Entering mid-to-late August, as the "Golden Nine" approaches, demand has picked up slightly, but supply pressure is still limited. Domestic aluminum rod inventories have remained basically stable, with a slight decrease. The overall aluminum bar inventory is expected to remain around 100,000-150,000 tons in August. In early August, the domestic aluminum profile market was still in the off-season. Although some downstream customers adopted the method of bargain hunting, the overall purchasing volume was small and failed to promote the increase in operating rate this week. The operating rate of the domestic leading aluminum profile industry remained stable this week, with the operating rate reaching 50.50%. From the perspective of different industries, orders for construction profiles have dropped significantly recently, and even leading companies can only maintain operating rates at off-season levels. In addition, the recently introduced favorable macro policies have not yet brought significant results, and SMM will continue to pay attention to their impact. In the field of industrial profiles, photovoltaic module production scheduling has not yet seen significant growth, while the purchase of downstream automotive profiles has increased, and companies are producing on demand. (Guohai Securities Chen Chen and Wang Xuan)
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