Aluminum prices fall in November
Aluminum prices remained strong in early November, showing a strong performance, but have recently fallen back. According to the Commodity Market Analysis System of Shengyi Society, as of November 27, 2024, the average price of aluminum ingots in the East China market in China was 20553.33 yuan/ton, a decrease of 5.37% from the market average price of 21720 yuan/ton on November 8.
Positive factors for aluminum prices
1. The downward space for aluminum prices has narrowed
At present, the absolute price of aluminum ingots is not small, but the actual profit is not significant, and enterprises that do not extract aluminum oxide are experiencing significant losses. Mainly due to the high price of upstream alumina, most of the industry chain profits are allocated to alumina. Affected by the high price of alumina, the average cost price of electrolytic aluminum in China has exceeded 21000 yuan/ton, and the production of a single aluminum ingot is in a state of industry loss. Based on the promotion of industrial integration in the aluminum industry, overall, the comprehensive profit of alumina aluminum ingots aluminum materials is still high, and the expected reduction in production in the short term is not significant. However, enterprises with a large amount of external alumina mining face considerable pressure. Based on cost considerations, the downward space for aluminum prices has narrowed.
2. Good domestic supply and demand data for aluminum ingots
Overseas imports: The import window for electrolytic aluminum continues to close, leading to a downward shift in Shanghai. Import profits are negative, approaching -2000 yuan/ton. There is no expected increase in overseas supply.
Domestic supply: In terms of electrolytic aluminum production, the weekly output of electrolytic aluminum remains around 830000 tons; Inventory data shows that as of November 25th, the inventory of electrolytic aluminum in China’s major markets was 550000 tons, an increase of 60000 tons from 610000 tons on October 31st. As of November 21, the inventory of China’s electrolytic aluminum plant area was 67000 tons, which was 56000 tons compared to October 31, with a cumulative inventory of 9000 tons. The aluminum ingots will be sold out of stock as a whole in November.
Negative factors in aluminum prices
1. There is an expectation of weakening export demand
On November 15, 2024, the Ministry of Finance and the State Administration of Taxation issued a notice on adjusting the export tax rebate policy. Starting from December 1, 2024, all export tax rebates for aluminum products will be cancelled, involving 24 tax codes such as aluminum strips, aluminum foils, aluminum tubes, aluminum tube accessories, and some aluminum bar profiles.
The partial 301 tariff policy of the United States came into effect on September 27th. This includes a 100% tariff on Chinese electric vehicles, a 50% tariff on Chinese solar cells, and a 25% tariff on Chinese steel, aluminum, electric vehicle batteries, and key minerals.
The cancellation of export tax rebates for downstream aluminum products in China and the implementation of some 301 tariff policies in the United States. Prior to this, under the guidance of the new US president and tax increase policies, the overseas landing costs of exported products have been raised from a domestic perspective. The export demand of the aluminum industry chain is expected to weaken.
2. Doubts about the sustainability of cost support
Although the short-term cost support for aluminum ingots remains strong, the sustainability of cost support is questionable. The fundamentals of proximal alumina remain favorable, but it has also been reflected in prices, with even alumina prices exceeding expectations and experiencing excessive increases. Currently, the profit window for alumina exports is gradually closing, and due to high prices, there will be more production capacity in the future, and long-term excess pressure will gradually emerge; The risk of alumina price pullback has increased, and the cost support risk of aluminum ingot prices has intensified.
Overall, in the short term, domestic aluminum prices will mainly fluctuate weakly, with an increased probability of sideways movement.
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