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Season 3: Off-season in the aluminum market
After Shanghai Aluminium was hit again by high tide on June 20th, the price began to gradually decline, and the domestic spot price of strong performance in the previous period also drastically pulled back in the state of diving. Before the arrival of the traditional off-season, the expectation that domestic aluminum supply pressure will increase will be reflected in advance. The favorable policies of the state to cancel the 5% tariff on aluminum alloy exports since July 1st of this year have also been consumed by the market during the previous rise. It is expected that the domestic aluminum price trend will remain weak during the off-season in the third quarter. In recent years, the trend of aluminum prices in China has been dominated by national policies. Recently, the decline in domestic aluminum prices has also been attributed to the country’s impending cancellation of alumina import tariff concessions for processing. However, after the current macro-control, the aluminum market has begun to develop soundly, and at the same time, the national policy will also be loosened. No more stringent measures are expected in the short term. The domestic aluminum ingot output still maintains a strong growth momentum, which is an important reason for the market to worry about the future supply increase. According to data released by China Customs, domestic aluminum ingot production increased steadily in the first five months of this year. Production in April and May (619,000 tons in April, 639,000 tons in May) has exceeded November last year (616,000 tons). In December (62.6 million tons), the cumulative production from January to May was 3.02 million tons, which has reached 44% of the total output in 2004. According to historical data statistics of production, generally the output in the second half of the year is higher than that in the first half of the year, and it is showing a monthly growth trend. It is inferred that monthly domestic production will continue to increase from June to December 2005. While the output continues to increase, the domestic aluminum ingot export interest has been weakened due to the fact that the ratio between the Shanghai and London markets remained at a high level. According to newer data from China Customs, exports have continued to grow in the first five months of this year. In May aluminum exports were 142,280 tons, net exports were 114,000 tons, and aluminum exports from January to May increased by 49.8% to 587,219 tons. However, since the end of May the ratio of the two cities has been maintained at more than 9.5, and according to the current import and export policies of aluminum ingots, the ratio is maintained at about 8.3-8.5 is more reasonable, the market appears to buy London to throw domestic cross-market arbitrage opportunities. On the one hand, high price parity has reduced the domestic enthusiasm for the export of aluminum ingots, and on the other hand, it may cause a large number of imported aluminum ingots. At the same time, according to the historical experience of the increase in stocks and net exports, the stock of the Shanghai Stock Exchange has gradually increased in mid-June, and it can be expected that domestic aluminum ingot exports will gradually decrease in June 2005. The worries of the domestic market for the future aluminum market are directly reflected in the domestic spot price trend dominated by inventory changes. In the traditional peak season of traditional metal consumption, domestic booming consumption coupled with continued large-scale exports kept domestic inventories declining and reached a low point of 20,750 tons on June 10. The short-term tensions in domestic supply and demand made spot prices in Shanghai and Guangdong set to hit a record high since the beginning of the year in mid-June. However, after the gradual increase in inventory pressure, spot dealers increased the intensity of spot aluminum ingots, prices fell sharply. Taking the South Reserve quotation as an example, the quoted price on Wednesday was more than 700 yuan per ton lower than the price in mid-June. Due to the slowdown in consumption in the aluminum processing industry, coupled with the fact that spot buyers do not buy up, the domestic spot price trend is not optimistic. In addition, the drop in the price of imported alumina weakened the impact of cost factors on aluminum prices. As the market expects that the country will eventually adjust its alumina import tariffs, domestic aluminum smelters have already reduced their purchases. In May, alumina imports decreased from 787 thousand tons in April to 521,000 tons. The decrease in alumina imports, coupled with the drop in shipping charges, has led directly to a drop in the price of imported alumina, which has fallen by more than 10%. At present, China's imported alumina port CIF quoted at about 420-440 US dollars, the European FOB is about 410 US dollars; port warehouse price is roughly 4650-4750 yuan / ton. Due to the high oil prices and the general power shortage in the country, it is estimated that the import volume of alumina will still decline slightly in summer, and there is still room for further reduction in the price of imported alumina. Technically, the aluminum prices in Shanghai in March have fallen below the important support of 16,500, and there is the possibility of continuing to test 16200. The international aluminum price is also weakening recently. According to data released by the International Aluminum Association, there are signs that the international aluminum market is in oversupply and prices are under pressure. However, if the electricity shortage can cause nearly 1 million tons of aluminum aluminum ingot production to stop production, the decline in aluminum prices will not be too large. It is expected that between 1650-1800 US dollars is likely to operate.