Aluminum prices moved down in October
According to the Commodity Market Analysis System of Business Society, on October 30, 2023, the average price of domestic aluminum ingots in the East China market was 19163.33 yuan/ton, a daily increase of 1.277%, and a decrease of 3.49% compared to the aluminum price of 19856.67 yuan/ton at the beginning of the month (October 1).
In the long term, the current price is in a sideways range after a high decline. Since May, the price has been fluctuating below 19000 yuan/ton, breaking through 19000 yuan/ton at the end of August. In September, aluminum prices first fell and then rose, and in October, the center of gravity of aluminum prices returned to around 19000 yuan/ton.
Overview of Fundamentals
Loose supply
Supply side: Recently, a certain electrolytic aluminum enterprise in Inner Mongolia has added 200000 tons of production capacity and is gradually entering the production cycle. It is expected to reach full production by December. Electrolytic aluminum enterprises in the southwest region are basically resuming production, and we will pay attention to whether the precipitation in the southwest region in November will once again interfere with production. At present, the wave of resuming production has basically ended, and the overall supply is relatively loose. However, there are recent news on the market that Yunnan will reduce production.
The demand side rebounded month on month and decreased year-on-year
In terms of demand: Last week, the operating rate of domestic aluminum downstream processing leading enterprises increased by 1.2 percentage points compared to the week before the holiday to 64.5%, a decrease of 2.7 percentage points compared to the same period last year.
Due to the entry of cables into the industry’s centralized delivery period, the terminal pickup volume has significantly increased, driving a significant increase in operating rates; The operating rates of aluminum strip and aluminum foil plates have slightly increased; The recycled aluminum alloy sector is mainly due to the resumption of normal production and a rebound in operating levels after the holiday, but actual demand has not significantly increased yet. However, only the operating rate of the profile sector has declined, especially the construction profile sector is relatively weak.
Narrow fluctuation in cost
Cost side: The spot market for alumina continues to rise due to supply side production cuts. The prices of coal at ports and pitheads have shown a downward trend, and the mainstream self owned power plants in Shandong have once again lowered their coal procurement prices for November. The immediate full cost of electrolytic aluminum is around 16231 yuan/ton, a month on month increase of 33 yuan/ton. The recent pressure on coal prices has to some extent limited the expected increase in future electricity costs for electrolytic aluminum. In addition, the expected decrease in procurement prices for auxiliary materials such as pre baked anodes in November is expected to hedge against a slight increase in alumina, and it is expected that the short-term domestic electrolytic aluminum cost will mainly fluctuate within a narrow range.
Inventory increased month on month
In terms of social inventory, following the start of destocking in the second half of July, inventory is relatively low. As of October 30th, the social inventory of mainstream electrolytic aluminum ingots in China was 612000 tons, with a cumulative inventory of 57000 tons compared to October 7th. Based on year-on-year data, it is close to the 636000 tons in the same period of last year’s post holiday history and still at a low level in the same period of the past five years.
Future market forecast
Electrolytic aluminum production enterprises mainly maintain stable production and have large operating capacity. Currently, there is a surplus of aluminum ingot inventory after the holiday, and the supply of aluminum ingots is sufficient to suppress aluminum prices. However, the demand in the downstream peak season is partially fulfilled, with strong cost support and narrowed downward space. It is expected that in the short term, the probability of aluminum price fluctuations and sideways operation will increase.
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