Aluminum prices strengthen in January
Aluminum prices strengthened overall in January, but as the Spring Festival approaches, the trend of aluminum prices begins to turn around. According to the Commodity Market Analysis System of Shengyi Society, as of January 23, 2025, the average price of aluminum ingots in the East China market in China was 20213.33 yuan/ton, an increase of 2.17% from the market average price of 19783.33 yuan/ton on January 1, and a decrease of 0.62% from yesterday.
Recently, aluminum prices have reversed the decline of the past two months and stopped falling. The driving force behind the slight rebound in aluminum prices is mainly due to the following factors:
Factor 1: Driven by Lunan Aluminum;
1. The EU may implement a ban on Russian aluminum, and the news that Russian aluminum will once again face Western sanctions has raised expectations of increased demand for LME spot goods.
2. The Russia-Ukraine conflict, the information that may affect the natural gas facilities, together with the decline of natural gas inventory in Europe in the severe winter, has significantly promoted the rise of natural gas prices in Europe. The rise in energy prices has pushed up the cost of aluminum ingots in Europe. Supporting the price of London aluminum
Factor 2: Inflation expectations driven by the Trump effect;
On a macro level, Trump’s inauguration within this month has intensified uncertainty in policy interpretation. The domestic tax cuts and external tax increases advocated by Trump have pushed up the prices of imported goods and increased market concerns about re inflation.
Factor 3: In the trend of domestic aluminum ingot destocking:
Aluminum ingot inventory maintains a trend of depletion, and the rate of depletion far exceeds expectations. According to data, as of January 23, the social inventory of aluminum ingots in mainstream areas of China was 459000 tons, an increase of 10000 tons from 469000 tons on January 2.
Reasons for weak upward momentum
Although aluminum prices rose in January due to the combined effects of the above factors, the sustainability of continuing to rise is weak.
Considering domestic supply and demand factors, the operating capacity of electrolytic aluminum is currently maintained at a high level, and the operating rate remains above 95%. Although the current inventory data of aluminum ingots is relatively small, there is a strong expectation of a month on month decrease in the aluminum water ratio with the arrival of the Spring Festival. The seasonal accumulation effect of aluminum ingots is obvious, and there is a strong expectation of pressure on the supply side of aluminum ingots. On the other hand, on the demand side, it is common knowledge that the downstream operating rate will decrease during the Spring Festival holiday. The operating rate of downstream processing enterprises continues to decline month on month, and the off-season for market demand is approaching.
From a cost perspective, the price of raw material alumina has been significantly declining recently. The strong support on the cost side in the early stage has weakened, and the profits of electrolytic aluminum plants are gradually recovering. The expectation of losses and production cuts in the early stage of aluminum plants has weakened.
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