[Aluminium.com] aluminum prices at home and abroad since the beginning of September oscillation down, as of September 29, Shanghai aluminum futures prices have dropped from 15,000 points at the beginning of the month to 13900 points, a decrease of 1100 points or more than 7%. This contrasts sharply with the sharp rise in aluminum prices in March-August, when Shanghai Aluminum rose from 12,600 to 15,000, an increase of 2400 points. The decline in aluminum prices was mainly due to the fact that after the gradual closure of the micro-stimulus policy, the Chinese economy once again exhibited a weak phenomenon, and aluminum demand was not booming. However, when prices were high, domestic aluminum enterprises resumed production and aluminum production continued to increase. As a result, aluminum prices have been under greater pressure and the market outlook is still worrying.
China's economic performance is weak
The Chinese economy has once again demonstrated a weak trend. The previous micro-stimulus policy failed to keep the economy strong and led to a weakening of aluminum demand. The recent data has caused the market to worry about China's economic prospects. In August, the value added of industrial enterprises above designated size increased by 6.9% year-on-year, 2.1% from July, which was a relatively low level in the past six years. In August, there was a negative year-on-year growth of 2.2% of electricity generation; The decrease in growth rate and the acceleration of import deceleration have all made investors feel cold. In fact, after the Chinese government had just given some stimulus policies, the central bank successively lowered its targets on April 25 and June 16 successively. The National Development and Reform Commission intensively approved a batch of railway investment projects to start in July and August to stimulate economic growth. . However, this is only a slight stimulus, and the Chinese government has refused to stimulate it on a large scale. This has also made the economic growth performance weaker again from August to September.
Poor performance of aluminum during peak season
Affected by the sluggish domestic economy, the demand peak season for aluminum production in September-October has been underperforming again. Many aluminum processing companies have reported that orders have increased since the end of August, indicating that the peak season is on schedule, but the increase in orders is not as good as in previous years. A survey conducted by Shanghai Fubao Network in Henan Province recently showed that even aluminum processing companies with an annual output of 1,000-10,000 tons can only maintain the operating rate of 75%, and small enterprises below 1,000 tons are even lower. Weak economic performance has affected all industries in the country. The large aluminum consumer real estate industry is adversely affected by declining house prices and high inventory levels, which have affected the consumption of aluminum, making it difficult to form a busy season.
Domestic aluminum production continues to increase
Another source of pressure on aluminum prices comes from the increasing production of aluminum in China. Domestic aluminum companies that stopped production and cut production at the low prices from March to May were gradually restarting production after the rebound in aluminum prices. The impact was also significant. Newer data shows that domestic aluminum output reached 2.027 million tons in August, which is the first time that China’s aluminum output exceeded 2 million tons, an increase of 8.8% over the same period of last year. This is a situation in which the country continuously issued documents to eliminate excess capacity and limit new production capacity. Made under. In fact, in the past few years, the new production capacity in the northwestern region continued to form, and some aluminum enterprises that stopped production and reduced production in the mainland from March to May gradually resumed production, all of which increased aluminum production. It is estimated that from May to now, aluminum production capacity of 500,000 tons will be resumed.
Strong dollar will suppress aluminum prices
The US dollar index formed an upward breakout on the upper edge of the consolidation zone in the past year, which broke through 81.5 points on August 19, and it performed quite strongly, putting tremendous pressure on the prices of non-ferrous metals including aluminum. The strength of the dollar was first and foremost because the US economy quickly recovered from the cold winter in February. The Fed steadily withdrew from QE and has the desire to raise interest rates. The dollar has gained a strong economic foundation. The Ukrainian incident was followed by the U.S. and the EU jointly imposing economic sanctions on Russia. However, the negative impact on the European economy was far greater than the negative impact on the U.S. economy, which damaged the euro base and helped the strength of the U.S. dollar. Later, the US dollar has been oscillating between 78.5 and 81.5 points since September last year, and technical buying has strengthened the dollar's gains after breaking up. The dollar is likely to rise to 89 points and will continue to exert pressure on international aluminum prices.
In short, aluminum prices are under pressure from China's weak economy, domestic primary aluminum production, and the appreciation of the US dollar. Considering the overall bear market pattern of commodity prices, it is highly probable that the price of aluminum will be under pressure during a period of time.
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