Aluminum prices in November will experience a “V” decline
Aluminum prices will experience a “v” trend in November. According to the Commodity Market Analysis System of Shengyi Society, as of November 30, 2024, the average price of aluminum ingots in the East China market in China was 20373.33 yuan/ton, a decrease of 2.05% compared to the market average price of 20800 yuan/ton on November 1, with a monthly fluctuation of 6.45%. The high point of the month appeared on November 8, with a daily average price of 21720 yuan/ton.
Aluminum prices weaken and decline in mid to late November
The weak downward trend in aluminum prices in mid to late November is mainly due to three factors. Firstly, after the aluminum prices rose in the first half of the year, they reached a new high for the year. However, the actual demand from downstream terminals was lower than expected, which led to resistance to high priced raw materials and intensified competition in the upstream and downstream of the industrial chain; Secondly, due to the cancellation of export tax rebates for downstream aluminum products, there is an expectation of weakened export demand in the short term. At the same time, there is a strong expectation of tax increases in the United States, which suppresses prices; The third is the main driving force behind the upward trend of aluminum ingots, and the expectation of sustained cost increases is weakening.
Expected production reduction after cost increase
Overseas, Rusal announced that it will reduce production by more than 6% (about 250000 tons) to cope with high alumina prices and rising macroeconomic risks.
Domestically, as the spot price of alumina continues to rise at a high level, the average cost of aluminum ingots in the country has risen to around 21100 yuan/ton, and over 60% of the country’s aluminum ingot production capacity has suffered losses. It cannot be ruled out that production capacity reduction and operation may occur due to the low degree of industrial chain integration.
List of Domestic Inventory Data for Aluminum Ingots
In November, the total inventory of domestic aluminum ingots decreased slightly. As of November 28th, the inventory of mainstream electrolytic aluminum plants in China was 64000 tons, a slight increase of 8000 tons from the inventory of 56000 tons in mainstream electrolytic aluminum plants on October 31st; The social inventory of electrolytic aluminum in the mainstream domestic market is 553000 tons, which is 57000 tons lower than the 610000 tons in the mainstream domestic market on October 31st.
The continuous depletion of aluminum ingot spot inventory is mainly due to two factors. Firstly, after the supply side reform of domestic electrolytic aluminum, the production capacity is gradually approaching the ceiling, and the supply side increment is limited; The second reason is that the integration level of electrolytic aluminum enterprises has been improved. In order to reduce energy consumption and save ingot costs, the on-site conversion rate of aluminum water is increasing, resulting in a decreasing amount of ingots year by year. The aluminum to water ratio will operate within the range of 63.6-73.8% in 2024, with an average of 71.1%, an increase of 5.3% compared to the same period last year, which is 67.5%.
Based on the recent inventory circulation and supply situation, railway shipping in Xinjiang has continued to improve, with a significant increase in arrivals from mainstream consumer destinations.
Aluminum prices are expected to remain weak in December
Due to the implementation of the aluminum export tax rebate policy on December 1st, the frequency of overseas buyers’ inquiries and the pace of rushing for exports have continued to accelerate recently. In late November, the downstream demand for aluminum ingots was still strong, and the off-season was not weak. In December, with the slowdown of downstream export pace, there may be negative feedback on the aluminum ingot market, and the expectation of a off-season may come. It is expected that aluminum prices will mainly operate weakly in December. The main risk variables are the sustainability of cost support (whether alumina prices continue to remain high) and changes in aluminum ingot production capacity.
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