Standing on a 15-year high, how will Shanghai Aluminum go next?

Shanghai Aluminum started this wave of gains in April last year, and it has been nearly 4 months. Although there have been declines during this period, each fall seems to be for higher and stronger rises. In late August, the futures price rose above 17 points and hit a 8-year high today.

Why is Shanghai Aluminum so strong? What impact will the NDRC’s tiered electricity price policy for the electrolytic aluminum industry have on the cost side? “Golden Nine and Silver Ten” is approaching, what is the expectation of follow-up demand? Will the short -term strong trend of aluminum prices continue? Wenhua Finance [Institutional Consultation] section invites aluminum futures experts to analyze them one by one for you.

[Institutional consultation]: Shanghai Aluminum keeps setting new highs for many years, why is the future price so strong?

Wang Yunfei, researcher of all ferrous metals at Shenyin Wanguo Futures Research: The recent strength of aluminum prices is mainly due to the continuous emergence of supply-side disturbances. After experiencing the production restrictions in some northern provinces caused by the previous electricity curtailment and carbon neutrality, market supply has again become variable in September. Last week (August 27), the total control requirements for aluminum production under the power generation in Jizhou, Xinjiang are expected to be strictly implemented. Under the circumstance, the output was reduced by more than 400,000 tons during the year, and about 110,000 tons per month, which once again caused the risk of shortages in the balance of supply and demand in September and the fourth quarter. In addition, Yunnan is expected to continue to limit production in the fourth quarter, and domestic production may actually be close to the long-term upper limit. . After that, last week’s lower US dollar index boosted the metal sector, and the short-term aluminum price does not rule out further rises.

Gao Weihong, all color researcher of Jinrui Futures Research: The core driving force for the continuous record high of aluminum prices is the dual-carbon background. As a high-energy-consuming enterprise, electrolytic aluminum has been continuously affected by energy consumption control and power curtailment. The Changji area of ​​Xinjiang was also forced to suppress production during the rest of the year due to the dual control of energy consumption. The Guangxi area again demanded that the September output of aluminum plants should not exceed 80% of the average monthly output in the first half of the year. The production capacity reduction during the year may reach 250 due to factors. 10,000 tons level. In addition, the third batch of dumping of reserves landed last week, and the 70,000-ton level fell short of the previous value and expectations. At the same time, the dovish remarks of the Chairman of the Federal Reserve made all the bad news, and the price of aluminum continued to rise.

East Asia Futures Researcher Wang Yue: In 2021, overseas demand will continue to be repaired, while supply will be stable, and overseas markets will continue to be in short supply; observing domestic, supply disturbances continue throughout the year, dumping of reserves and imports cannot stabilize supply and demand, and domestic and foreign supply and demand continue to be strong Aluminum prices are strong.

Liu Dongbo, a researcher at SDIC Anxin Futures Research Institute: Continuously limited supply is the main reason for this round of aluminum prices. Documents transmitted on the Internet over the weekend showed that the Guangxi region will hold a deployment meeting to strengthen the dual control of energy consumption, and it is proposed that the output of each electrolytic aluminum plant in September shall not exceed 80% of the average monthly output in the first half of 2021. The electrolytic aluminum in Guangxi has built a production capacity of 2.5 million tons, which is close to full production before August, and the operating capacity accounts for about 6.5% of the total domestic operating capacity. At the beginning of August, the Guangxi Power Grid had asked the electrolytic aluminum plants in the province to drop 30% of the electricity load. Subsequently, Baikuang, Yinhai, and Xiangji, which used network power, reduced production by 10%-20%, and the total scale was about 200,000 tons. According to this document, the impact of companies that have previously reduced production is limited, and Xinfa, Hualei, and Debao, which use their own electricity, are facing a total reduction of about 200,000 tons. Therefore, the scale of production reduction involved in this document is only equivalent to less than 1% of the current domestic operating capacity, but it has played a role in adding fuel to the fire under the condition of frequent production restrictions. , This winter energy consumption and power problems may face greater challenges.

After the National Development and Reform Commission’s press release this month gave another warning to provinces where energy consumption will not drop but increase in the first half of the year, Xinjiang, Ningxia, Qinghai, Guangxi, Inner Mongolia and other places have responded to varying degrees. Last week, Xinjiang’s Changji Prefecture Development and Reform Commission issued a document requiring strict control of electrolytic aluminum production in accordance with compliance indicators. In the early stage, over-production enterprises faced a reduction in output, and local monthly output fell by about 20,000 tons. The Qinghai Province electrolytic aluminum plant received the notice and required to make preparations for orderly use of electricity, and the specific measures are unknown. The Ningxia Energy Conservation Office interviewed the four district leaders of Ningdong Energy and Chemical Base, Shizuishan, Zhongwei, and Wuzhong City, which are the first-level warning of energy consumption dual control, and put forward rectification requirements. The local electrolytic aluminum may also reduce the load.

[Institutional consultation]: Last week, what impact will the National Development and Reform Commission’s electrolytic aluminum industry’s tiered electricity price policy have on the cost side?

Wang Yunfei, all ferrous metal researcher of Shenyin Wanguo Futures Research: According to the documents of the National Development and Reform Commission, the tiered electricity price has a significant increase in long-term costs, mainly to encourage enterprises to strengthen technological progress, reduce energy consumption, and use renewable and other green energy as much as possible for production . However, the current profit of electrolytic aluminum production is at a historically high level, and the impact of rising costs on prices should not be obvious.

Gao Weihong, all color researcher of Jinrui Futures Research: The new tiered electricity price policy, on the one hand, is a change in the evaluation standard, from the upgrade of aluminum liquid AC power consumption to aluminum liquid comprehensive AC power consumption, on the other hand, the benchmark is increased, from 13700 to 13650kw/ t, and the standard will continue to be lowered from 2023 to 2025. According to Antaike’s statistics, the current monthly combined power consumption of 12.5% ​​of production capacity is higher than 13,650, of which 4.5% is grid power, so although the cost of 2022 will increase, but the extent may be limited, but the energy consumption control of my country’s electrolytic aluminum in the past ten years To make great progress, it is challenging to meet the standards in 2023 and 2025, so the cost of electricity tends to move upward in the long run. However, the state encourages aluminum companies to invest in non-water new energy sources, which is conducive to the improvement of electricity costs.

East Asia Futures Researcher Wang Yue: According to the “Notice on the Tiered Electricity Price Policy for the Electrolytic Aluminum Industry” issued by the National Development and Reform Commission on August 26, 2021, it is clear that starting from 2022/2023/2025, the grading standard for the comprehensive AC power consumption of molten aluminum is 13650/13450/13300 kwh/t (excluding desulfurization power consumption), the power consumption of electrolytic aluminum enterprises is higher than the classification standard, for every 20kwh over, the electricity consumption of molten aluminum production will increase by 0.01 yuan per kwh.

In 2020, the average comprehensive AC power consumption of my country’s electrolytic aluminum industry is 13,543 kWh per ton. Therefore, from an overall perspective, this policy has little effect on the national average production cost of electrolytic aluminum in 2022.

However, according to the classification data of Shanghai Iron and Steel Union, the production capacity with electricity consumption above 13650kwh/t accounts for 16.3%. If the short-term energy saving transformation is slow, this part of the production capacity will face the pressure of rising costs in 2022. According to calculations, the electricity consumption per ton of these companies is 13,787kwh, which is 137kwh/t higher than the level of 13,650kwh/t, and is close to 7 times the classification standard. The operating cost of this part of the marginal enterprise is expected to increase by 0.07 yuan/kwh/t, corresponding to The average power consumption and cost increase are about 965 yuan/ton.

Liu Dongbo, researcher at SDIC Anxin Futures Research Institute: Last Friday, the National Development and Reform Commission issued a notice on the tiered electricity price policy for the electrolytic aluminum industry. The organization should be cancelled immediately. At present, electrolytic aluminum companies in many regions such as Yunnan, Qinghai, and Guangxi have preferential electricity prices. If they are strictly implemented, the companies will face significant cost increases and may affect the transfer of a large amount of production capacity in Yunnan. However, government funds and policy cross-subsidies have not been widely implemented nationwide, and they will also become cost increase items. Since the beginning of this year, electricity prices in various regions have been adjusted to varying degrees, and electricity costs will continue to rise in the future.

[Institution consultation]: The social inventory of aluminum ingots has increased slightly. What is the current downstream consumption situation in the aluminum market? “Golden Nine and Silver Ten” is approaching, what is the expectation of follow-up demand?

Wang Yunfei, researcher of all non-ferrous metals at Shenyin Wanguo Futures Research: The downstream consumption of aluminum is about to enter the peak season in September, but in the future, with the reduction of overseas stimulus policies and the reduction in production of auto companies caused by the supply of auto chips, consumption growth may be less than expected. Judging from the apparent consumption data in June and July, the high base and weakening of external policies have led to a sharp decline in the growth rate of apparent consumption. The demand for gold, nine, and silver, ten and later periods is expected to be relatively stable, and it is not expected that there will be more than expected growth. The pick-up appears.

Gao Weihong, a researcher of Jinrui Futures Research: The current downstream consumption performance in the off-season, especially the recent rapid rise in aluminum prices, has limited downstream willingness to receive goods. However, relatively optimistic expectations can still be maintained for the golden nine and silver ten, the logic of real estate completion can continue, photovoltaic construction will further accelerate, and orders for packaging and products will remain stable, but it is true that the base of the same period last year is relatively high, so consumption growth will decline. .

East Asia Futures Researcher Wang Yue: Short-term rigid demand consumption is still relatively stable, but high prices have restrained the downstream enthusiasm for taking goods. The peak season demand expectations cannot be falsified, and we can only stay concerned.

Liu Dongbo, a researcher at SDIC Anxin Futures Research Institute: In the past two weeks, stocks in transit due to rainstorms and other factors have gradually arrived. The social stock of aluminum ingots has increased slightly, mainly due to the increase of more than 30,000 tons of concentrated arrivals in Gongyi. According to SMM’s statistics, the operating rate of aluminum processing enterprises has rebounded slightly recently, and the electricity curtailment of aluminum processing enterprises in Henan has been lifted. The operating rate of domestic plates, strips, foils and profiles is still at a relatively high level in recent years. In July and August, with large imports and dumping of reserves, social inventory accumulation was not obvious, and apparent consumption was not weak in the off-season. Consumption in September does not rule out the lack of peak season due to macro changes in domestic real estate, but even if the current performance is maintained, there will still be gaps.

[Institutional consultation]: Will the short-term strong trend of aluminum prices continue? What factors are worth paying attention to on the supply and demand side of the subsequent aluminum market?

Wang Yunfei, researcher of all ferrous metals at Shenyin Wanguo Futures Research: Considering the trend of the US dollar and the news of Xinjiang’s production suppression, market sentiment is currently relatively high, and aluminum prices are expected to continue to run at a high level in the short term. The later market mainly focuses on consumption growth, Xinjiang’s policy implementation, and the scale of production capacity reduction in Yunnan in winter. Judging from the current output changes and policy situation, the domestic electrolytic aluminum output may have basically reached the top in the medium and long term, and the future market will be more sensitive to changes in consumption. In addition, it is also recommended to pay attention to the import situation of aluminum alloy, if there is an unexpected increase, it will alleviate the pressure brought by the recent tight supply.

Gao Weihong, a researcher of Jinrui Futures Research: The strong aluminum price situation may be difficult to reverse, and the gap between supply and demand is large. Even with the replenishment of reserves and imports, the peak season inventory will continue to decline. The focus of attention on the supply and demand side is still on the supply side. First, the scope of production restrictions caused by energy consumption control. Second, the power shortage situation may improve in September-October. It is concerned about whether the production capacity of the southwest region due to power shortages will resume production.

East Asia Futures Researcher Wang Yue: The strong aluminum price is due to the large supply interference. According to Baichuan data, due to the energy consumption control requirements of various provinces, the domestic electrolytic aluminum production has been reduced by more than 2.5 million tons since 2021, and the operating capacity has experienced a negative year-on-year growth.

According to the “Barometer of Completion of Energy Consumption Dual Control Targets in Various Regions in the First Half of 2021” issued by the National Development and Reform Commission on August 17, the energy intensity of important electrolytic aluminum production areas such as Xinjiang, Yunnan, Guangxi, and Qinghai has risen instead of falling. It is expected that the disturbance of electrolytic aluminum production capacity will continue.

The further rise of the subsequent aluminum market needs to pay attention to whether the leading factors of supply are switched, and the succession of demand.

Liu Dongbo, a researcher at SDIC Anxin Futures Research Institute: Overall, dual energy consumption control and power curtailment tend to be stricter, and it is difficult to recover from the supply side. Last week, the State Reserve Bureau announced that the third batch of dumped aluminum ingots was only 70,000 tons lower than expected and the previous batch of 90,000 tons. The dumped reserves were not enough to make up for the growing gap. The import window will be opened in stages, and the inventory is in recent years. The low level during the same period and the possibility of a lower decline. There are few negative factors for Shanghai Aluminum, and it is still easy to rise but hard to fall despite the continuous increase in policies. However, the current market is overheating, and Shanghai Aluminum is wary of stampede or other regulatory measures after the sharp rise. The supply side is concerned about whether the power curtailment will continue for a long time after the summer, and the demand side is wary of whether there will be processing restrictions in Guangdong and Jiangsu, where energy consumption levels are also a lot of red lights.

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