The profitability of aluminum enterprises with high cost and low price is difficult to improve in the short term

Statistics show that in the first quarter, China's electrolytic aluminum production of 4.59 million tons, an increase of 12.1%, an increase of 10.5 percentage points. The average price of electrolytic aluminum is 15,948 yuan/ton, down 662 yuan/ton, or 4%. According to Russia's United Aluminum company estimates that China's aluminum product production capacity has reached 5.2 million tons, exceeding market demand, and is currently showing a loss.
At the same time, some analysts believe that in 2011, China's industrial electricity prices increased, the cost of electricity prices increased so that this year's aluminum prices compared to last year at most flat, and may also fall. In 2012, the situation of China's aluminum industry may be more difficult, the pressure will be greater, and the profitability is difficult to improve.

Enterprise efficiency or zero growth

International Aluminum Association data show that in March, the average daily production of global primary aluminum fell to 68,400 tons, and the total production of primary aluminum in March was 2.121 million tons. According to Russia's Rusal company, the global aluminum market due to overcapacity in the first quarter of 2012 showed a loss. Previously, the statistics of the China Non-ferrous Metals Industry Association show that the growth rate of non-ferrous metals enterprises in 2012 will fall significantly, and there may be zero growth in the first quarter.

Chen Quanxun, president of the China Non-Ferrous Metals Industry Association, expects that in 2012, the international market for non-ferrous metals demand is still growing, some Western aluminum companies may reduce aluminum production, and the oversupply of primary aluminum will be alleviated.

In fact, in mid-April, China's domestic spot aluminum inventories maintained a slight downward trend, and only the South China Sea and other places continued to decrease, and East China performed repeatedly and even showed a small increase.

It is reported that the main reasons for the change in inventory are: First, domestic downstream enterprises, including real estate and automobile consumption, local improvement, and domestic consumption began to slow. Second, domestic electrolytic aluminum production enterprises continue to lose money, and the willingness of enterprises to ship has been reduced, resulting in a decline in the apparent inventory of statistics. But in fact, this part of the product has been transformed into the invisible inventory of enterprises, and the social inventory is likely to not be reduced. Third, demand for electrolytic aluminum has improved in places where processing enterprises are dense, such as Guangdong, and this part of electrolytic aluminum is converted into semi-finished aluminum. However, the downstream customers of aluminum enterprises may not keep up with the pace of orders, which has caused a backlog of aluminum enterprises, thereby reversely inhibiting the processing plant enterprises' willingness to purchase electrolytic aluminum.

Dependence on foreign countries remains high

At the same time, China's dependence on aluminum products remains high. In recent years, China's imports of aluminum and other bulk minerals have risen sharply, and refined aluminum has reached 52.9%.

From January to March, China imported 570,000 tons of scrap aluminum, a cumulative increase of 2.5%. Since the beginning of this year, the ratio of aluminum prices at home and abroad has been declining, which directly leads to the increase in the cost of imported scrap aluminum by domestic recycled aluminum enterprises, which makes the import of scrap aluminum limited, and in March due to the increase in demand for scrap aluminum in the casting industry, the current domestic supply of scrap aluminum is relatively tight.

The upstream supply is not timely, which will lead to the procurement of downstream aluminum die casting enterprises, thus affecting the production of aluminum die casting industry. Due to the tight supply of waste aluminum raw materials, the pace of consumption of the entire aluminum die-casting market has slowed down, and it is expected that this dilemma will be slowed down in April with the speed of waste aluminum customs clearance and the gradual recovery of corporate capital chain.

On May 1, Indonesia banned the export of unprocessed metal ores, including bauxite. In 2011, China's foreign dependence on bauxite is 59%, of which 47% of imports from Indonesia, raw materials completely dependent on imports or foreign procurement of enterprises affected by the greater.

The trend of low prices is difficult to change in the short term

At present, China's aluminum market is not optimistic, on the one hand, the domestic aluminum inventory is huge, downstream purchasing power is not enough to raise aluminum prices. On the other hand, the short force of the financial market has suppressed the domestic aluminum market to a certain extent.

According to the statistics of the non-ferrous metals Industry Association, the average annual price of non-ferrous metals in 2012 May be slightly lower than the average level in 2011, especially from the first quarter of this year to the first half of this year will still maintain the pattern of price shocks since the fourth quarter of last year, and prices may rise in the second half of the year.

Considering the slowdown in domestic consumption growth this year and the rising cost of aluminum enterprises and other factors, the current round of destocking cycle may be longer than last year, aluminum price adjustment space will be narrowed than last year, aluminum prices in the process of destocking may appear weak oscillation bottom market, but the space is limited. In March, the price of electrolytic aluminum in China was 16,001 yuan/ton, down 0.4% from February and down 4.5% year-on-year.

Russian aluminum company expects that in 2012 aluminum prices between 2200~2400 US dollars per ton hovering, but due to China's aluminum market gap reached 600,000 tons, customer inventory reached the lowest in 10 years, aluminum prices will be slightly increased, but the range will not be very large.

Internationally, as of April 18, 2012, the spot price of primary aluminum in India rose 0.7% to $2,050 per ton, and the spot price of primary aluminum on the London Metal Exchange fell 0.3% to $2,040 per ton. This year, the price of primary aluminum on the London Metal Exchange has remained at about $2087 per ton for three months, and the spot price of primary aluminum in China rose 0.4% to stay within the range of $2,500. At the same time, the price of aluminum billet in China also rose by 0.3%, which is also stable in the range of $2,500, the price of scrap aluminum is still around $2,600 per ton, and the domestic aluminum rod price is hovering at $2,200 per ton.

Domestic consumption is expected to pick up

Experts believe that in the face of the current difficulties, the next period of time, aluminum prices or will usher in a desperate rebound market.

Aluminum price rebound is expected to come from China's domestic market demand this year. Wang Huajun, deputy secretary-general of the China Non-Ferrous Metals Industry Association, said aluminium consumption would continue to grow in 2012, but at a slower pace than last year. If a good policy is introduced, the demand for aluminum will increase, and with the pressure of energy conservation and emission reduction, the advantages of aluminum in China will gradually emerge, and the application of aluminum will also expand.

China's real estate industry, automobile manufacturing and aerospace industries are developing rapidly, rigid demand is particularly strong, and domestic energy, labor costs and environmental protection costs are lower than foreign countries. Moreover, with the official release and implementation of the "Twelfth Five-Year Plan" for the development of non-ferrous metals industry and the "Twelfth Five-Year Plan" for the development of aluminum industry, the recycled aluminum industry is facing a new major turning point and has ushered in a new development opportunity.

After entering the second quarter, China's commercial banks began to issue loans to railway construction projects, so as to ease the situation of railway investment funds. Industry insiders said that if the funding situation is better, this year's railway investment or slightly more than planned. According to statistics, the proportion of aluminum in transportation has reached about 25%.

Wang Huajun, deputy secretary-general of the China Nonferrous Metals Industry Association, believes that with the gradual arrival of railway investment funds and the gradual resumption of suspended projects, China's aluminum consumption is expected to improve at the end of the second quarter and the beginning of the third quarter. At the same time, China's new energy vehicle planning will also drive the demand for automotive aluminum.

Moreover, due to the country's increasing demand for electricity transmission, the Chinese government has increased its investment in the new five-year plan by 88%. Among them, the State Grid Corporation of China plans to invest about $45 billion in smart grid technology research and development between 2011 and 2015, with the most spending years coming in 2012-2013.

The development and utilization of smart grid technology will benefit aluminum consumption, which means that in the future period of time, the consumption of raw metal aluminum is quite optimistic. The construction of the smart grid includes the establishment of high-voltage output cables, the construction of these cables will use 1.7 tons of aluminum per kilometer, and it is expected that China's aluminum consumption will increase by 16%, which will further improve the current situation of China's aluminum demand.