As the basic raw material, the price of aluminum should be "stable", and be alert to the large fluctuations in aluminum prices. Historical experience tells us that after a big rise, there must be a big fall, and a suitable and relatively stable aluminum price is conducive to the healthy development of the aluminum industry chain, and it is stable and far-reaching. Considering comprehensively the factors such as the cost of electrolytic aluminum, the profitability of each link of the industrial chain, downstream consumption and alternative competitiveness, combined with the historical trend of aluminum prices, and from the perspective of building a community of destiny in the aluminum industrial chain, a suitable and relatively stable period of time The price of aluminum should be between 13,000 and 14,000 yuan/ton.

Since February this year, domestic aluminum prices have gone out of the extremely strong “V”-shaped reversal market after experiencing a panic fall caused by the new coronary pneumonia epidemic. On July 10, the main contract of Shanghai Aluminum closed at 14,375 yuan/ton, a new high for the year; it was 3,120 yuan/ton higher than the lowest point of 11,255 yuan/ton on April 2, up 27.7%. During the same period, Lum Aluminum also rebounded from a low level, closing on July 9 at 1659 US dollars/ton, up 16.5% from the low point of the year.

This round of aluminum price increase was driven by multiple factors. We believe that: first, with the improvement of China’s epidemic, domestic demand is gradually repaired; second, the epidemic has led to a significant decline in domestic scrap aluminum recycling, while imports have continued to decline, and the supply of scrap aluminum was once tight, leading to the substitution of primary aluminum for scrap aluminum About 350,000 to 400,000 tons increased; third, after the aluminum price plunged at the end of March, the entire industry chain stored aluminum: upstream reluctant sales, active stocking by distributors, advance orders in the field of aluminum processing terminals, and large purchases of raw materials by processing companies; fourth, Explicit inventory quickly declined from a high of 1.68 million tons at the end of March to 710,000 tons on July 10, and there was a strong tension in spot supply. Fifth, abnormal speculation in the spot and futures markets appeared to contribute to the rise in aluminum prices.

Is the current aluminum price sustainable? Is it conducive to the stability of the industry chain? Market views vary. We believe that although the rapid rise in aluminum prices and high aluminum prices have a positive effect, the negative impact deserves our attention and vigilance.

Positive: First, it has promoted the steadily resuming production and production of the entire industry chain, and the aluminum industry has a significant profit-making effect on aluminum storage; second, the profitability of the alumina, electrolytic aluminum and auxiliary materials industries has increased significantly. Taking the electrolytic aluminum industry as an example, after experiencing a short-term overall loss, it turned into a full loss in May, and the profit level in June further improved. In June, the weighted average total cost of electrolytic aluminum in the whole industry was 11988 yuan/ton. Compared with the average spot price of 13810 yuan/ton in the month, the theoretical profit of aluminum per ton was 1822 yuan/ton, exceeding the best profit level last year. Close to 100%.

Negative: First, the import volume of unwrought aluminum (primary aluminum) and aluminum alloys has increased significantly, impacting the domestic aluminum market. As domestic aluminum prices have risen much higher than foreign countries, the foundation of aluminum prices both internally and externally has continued to stabilize. The domestic and international price comparisons have jumped to over 8.5 since the end of April, a new high since 2009. The import window for unwrought aluminum and alloys has been opened . Customs data shows that the cumulative imports of unwrought aluminum and aluminum alloys totaled 374,000 tons from January to May, an increase of 415% year-on-year; according to import profit space calculation and research, a large amount of unwrought aluminum imports will be concentrated in July to August It is expected that the total annual import volume will exceed 800,000 tons.

Secondly, the strong domestic and foreign aluminum price bureau has hindered the export of aluminum. Trade friction superimposes the impact of foreign epidemic situations, and the export situation of aluminum products is already very serious, while the inversion of domestic and foreign prices makes aluminum exports worse. Customs statistics show that from January to May, China’s aluminum exports totaled 1.903 million tons, a year-on-year decrease of 13.1%. We judge that the uncertainty of exports in the second half of the year will increase further.

Third, it will bring new challenges to the supply-side structural reform of my country's electrolytic aluminum industry. Driven by the rise in aluminum prices, the enthusiasm for domestic electrolytic aluminum capacity construction and commissioning has ignited again. According to statistics, in the first half of 2020, the newly invested electrolytic aluminum production capacity will be 680,000 tons/year. In the second half of the year, there will be 2.2 million tons/year of production capacity that can be completed and put into production. At the end of the year, the electrolytic aluminum production capacity will reach 42.5 million tons/year. In the case of insufficient growth momentum for demand, the contradiction of oversupply will become more acute, and the risk of a sharp price drop will increase.

Fourth, high aluminum prices have caused the consumption cost of aluminum products to increase, and the competitiveness of aluminum materials to replace other materials has declined, which is not conducive to the promotion of applications and inhibits the growth of demand.

As a professional who has been engaged in aluminum industry research for many years, we are a little worried about the current market situation. As aluminum is the basic raw material, aluminum prices should be stable and alert to the ups and downs of aluminum prices. Historical experience tells us that there must be a big drop after the big rise. Only when a suitable and relatively stable aluminum price is conducive to the healthy development of the aluminum industry chain Steady. Considering comprehensively the factors such as the cost of electrolytic aluminum, the profitability of each link of the industrial chain, downstream consumption and alternative competitiveness, combined with the historical trend of aluminum prices, and from the perspective of building a community of destiny in the aluminum industrial chain, a suitable and relatively stable period of time The price of aluminum should be between 13,000 and 14,000 yuan/ton.

Of course, the trend of aluminum prices has its own market law. What is the right aluminum price? It should be up to the market.

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