The traditional peak season is approaching, but the performance of downstream resumption of work is lower than market expectations, and short-term aluminum prices are suppressed.

1. Market performance

This week, Shanghai Aluminum showed a trend of first rising and then falling. The main 2010 contract closed at 14,235 yuan, a weekly decline of 35 yuan.

Technically, Shanghai Aluminum has moved from a rapid rise to a consolidation phase, and there are certain negative factors in the short-term market.

2. Influencing factors and analysis

In July, domestic alumina production was 6.1 million tons, a year-on-year decrease of 2.0% and a month-on-month decrease of 3.1%. This year, the domestic alumina production has shown a slow upward trend, but the rebound is not significant, and it is still lower than the output of the same period in 2019. As of September 10, the national average price of alumina was 2,321 yuan/ton. Under this price, alumina production is under greater pressure.

The domestic production of electrolytic aluminum in July totaled 3.096 million tons, an increase of 3.1% year-on-year and an increase of 2.7% month-on-month. The output hit a record high since 2016. In August, China's electrolytic aluminum production capacity was 37.931 million tons, an increase of 6.62% year-on-year and a month-on-month increase of 1.44%. It is speculated that electrolytic aluminum production in August will further increase.

The total social inventory of electrolytic aluminum on Thursday was 736,000 tons, an increase of 10,000 tons from the previous month. Last week, the aluminum inventory of the Shanghai Futures Exchange decreased by 2,000 tons to 249,000 tons. Both social stocks and the stocks of the Shanghai Futures Exchange are showing signs of turning heads up, but as far as the current stock level is concerned, the stock pressure is not great. Increased supply and almost unchanged inventory indicates better consumption.

Has now entered the end of the off-season, and the operating rate of downstream aluminum processing enterprises has remained stable overall. The operating rate of aluminum profile companies has not changed significantly, the number of pending orders has declined slightly, and the number of new orders is lower than expected. The operating rate of aluminum sheet, strip and foil enterprises has rebounded, while the operating rate of aluminum alloy processing enterprises and the operating rate of aluminum wire and cable enterprises have both declined.

3. Conclusions and strategies

Because of high profits, the supply pressure of electrolytic aluminum continues to increase, but the price pressure brought by the increase in supply is not significant. On the one hand, it is because the release of production capacity is lower than market expectations, and on the other hand, because the downstream consumption performs better, and the inventory of electrolytic aluminum Always low. At present, the traditional consumption peak season is approaching. Although the resumption of work is slow, if the electrolytic aluminum inventory can still remain low or even decline, then aluminum prices may rise further.

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