Aluminum prices fell by 5.68% in July
Aluminum prices continued to decline in July. According to the Commodity Market Analysis System of Shengyi Society, the average price of domestic aluminum ingots in the East China market on July 31, 2024 was 18986.67 yuan/ton, a decrease of 5.68% from the market average price of 20130 yuan/ton at the beginning of the month (July 1).
Reasons for the decline in July
1. Overseas economic data has hit hard on expectations of interest rate cuts, and the market no longer fully expects the Federal Reserve to cut interest rates in November. At the macro level, international commodity prices have been suppressed, and non-ferrous metal prices have retreated.
2. Weakening overseas data triggers recession expectations, while CPI data gradually raises market expectations of a weakening US economy. The Federal Reserve’s Beige Book shows that businesses expect future growth to slow down and the labor market to remain weak. The production of primary processed aluminum products in the United States has decreased, and the demand for aluminum ingots has maintained a low season performance.
On the domestic front, the economic data for the second quarter was released, with a GDP of 4.7%, which was lower than expected. Domestic downstream inventory replenishment and falsification, and inventory removal is not smooth. As of July 29th, the inventory of electrolytic aluminum in major domestic markets was 795000 tons, unchanged from the inventory of 795000 tons on June 3rd; Compared to July 1st, the inventory was 762000 tons, with a cumulative inventory of 33000 tons.
Summary of favorable factors in August
1. Domestic macro factors: Recently, the central bank has taken frequent easing measures, such as lowering the quoted interest rates for one-year and five-year loan markets. Subsequently, several banks announced the reduction of deposit interest rates, and some banks in Shanghai and Beijing began to lower mortgage interest rates. The National Development and Reform Commission and the Ministry of Finance issued the “Several Measures on Strengthening Support for Large scale Equipment Renewal and Consumer Goods Trade in”, and arranged about 300 billion yuan of ultra long-term special treasury bond funds for support.
Currently, the price of aluminum ingots has fallen to near the marginal cost, and the upstream raw material market is tight, which provides some support for the price.
Supply and demand dynamics in August
The Yunnan and Inner Mongolia projects have completed their resumption of production, and a factory in Sichuan plans to resume production of 12.5W by the end of July, with a planned duration of two months. The import window is currently closed.
Aluminum prices may stabilize and stop falling in August
At present, aluminum prices have fallen below the level of 19000 yuan, and downstream acceptance has increased. It is expected that aluminum prices may stabilize and stop falling in August.
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