Comparison of domestic and foreign aluminum price trend

This week the market spot benchmark prices fell sharply, in line with our previous aluminum prices will accelerate the decline in judgment. The discount for spot transactions continues to expand. The discount for spot prices of the Yangtze River in the East China market is 50-60 yuan/ton, the discount for spot prices of the South China and South China in the Guangdong market is 40-60 yuan/ton, and the discount for spot prices of the Yangtze River in Henan is 80 yuan/ton.

Supply is flowing and consumption is being dragged down by the economy

The fundamental reason for this round of aluminum price crash is, of course, the slowdown in economic growth and sluggish consumption growth, which aggravate the oversupply contradiction. More national electrolytic aluminum supply continues to grow, and the reduction of production has been met with greater resistance, leading to a large area of the reduction of production can continue to operate, and the new production capacity continues to be stable operation. According to Aladdin, Chongqing Jinghongyuan Industrial has a capacity of 50,000 tons of electrolytic aluminum and is running at full capacity. By the end of September, it has produced 14,594 tons of primary aluminum accumulatively.

This week's domestic spot inventory and last week's performance slightly down, our analysis is the normal digestion of the National Day period during the large increase in inventory, but the total inventory is still around 1 million tons. Wuxi market inventory continues to climb. Reflect the western region new project is still continuing to put into production sales. Aladdin in the middle of October to Xinjiang research results also showed that Xinjiang's aluminum ingots have been continuously sent to East China, South China and the Central Plains. In order to ensure cash flow, the target of the aluminum factory is zero inventory of aluminum ingots, the production of the factory.

In addition, Wuxi inventory rise is also related to the change of aluminum plant sales structure, especially in the southwest region, some aluminum processing enterprises operating rate is insufficient, resulting in aluminum plant aluminum water sales is not smooth, so the increase of aluminum ingot output.

The latest figures show that China's GDP grew 6.9% in the third quarter from a year earlier, the slowest since the first quarter of 2009. Slower growth in China is a drag on global commodity prices.

Extreme policies make the advantages of the cost convergence industry chain lose

However, Mr Aladdin's recent observations suggest that local government propping up aluminium plants was a key factor in the recent stampede to lower prices.

First of all, in addition to ensuring local GDP growth, employment, social stability and other factors, the local government is more critical to prevent the enterprise capital chain from breaking and the formation of local debt crisis.

Second, local governments have taken "extreme measures" to keep the smelters running. Some give very low preferential electricity price, such as the original electricity price of aluminum enterprises in Gansu Province 0.35 yuan/kWh, the direct drop of 10 cents, converted to the cost of electrolytic aluminum will reduce the cost of about 1350 yuan/ton. At the same time, we believe that Gansu's preferential policies are by no means unique. All regions will follow suit, and the expectation that the average cost of the whole industry will continue to decline is getting stronger and stronger.

Some give direct financial subsidies. For example, Guizhou allocated 35 million yuan of special subsidy funds to Zunyi Aluminum Industry, and Baihe Aluminum Industry obtained 60 million yuan of capital from the channel. There are also sales subsidies, such as Huanghe Xinye for each ton of aluminum water sales subsidies 75 yuan.

Details of recent preferential policies obtained by aluminum plants

Preferential policies obtained by enterprises

Liancheng Aluminum received a preferential electricity price of 0.25 yuan per hour

Dongxing Longxi Branch obtained 0.25 yuan/degree of preferential electricity price

Tongchuan Aluminum received 0.3 yuan per hour of preferential electricity price

Huanghe Xinye has received a preferential price of 0.34 yuan/kWh and is negotiating to lower the price to 0.27 yuan/kWh

Baihe aluminum industry received 60 million yuan subsidy

Zunyi aluminum industry received 35 million yuan of special subsidies

Linfeng aluminum electricity to determine the basic direct price down 5 cents

Qingtongxia aluminum obtained 0.33 yuan/degree of preferential electricity price

According to previous experience, the competitive advantage of aluminum plants in the market depends on the electricity consumption, and the aluminum plants with spontaneous power units have obvious competitive advantages. However, under the policy intervention of local government, the advantage of self-supplied electricity seems to have lost overnight, and the cost of the whole industry is convergent. As a result, the enterprises with the advantages of their own electricity industry chain are dragged down, and they have to face the harsh market reality.

Capital for the king of the aluminum plant must show their magic

Next which aluminum plant who can survive, the key to see whether it has a financial advantage, to ensure sufficient cash flow will have the capital to live. It depends on the individual enterprise credit level, in particular, state-owned enterprises credit government endorsement, from financial institutions to obtain high credit and lower lending rates, while private enterprise depends on the enterprise in the past accumulated credit rating in the process of high and low, some private enterprises, financial institutions want to give credit, But some private companies find it difficult to borrow directly from financial institutions unless they are subject to higher interest rates.

Alumina prices dragged down the cost of electrolytic aluminum continued to decline

Another factor pulling down electrolytic aluminum costs is that aluminium oxide prices are expected to continue their downward momentum due to production cuts in electrolytic aluminum production. Next week may no longer stick to the 10-30 yuan drop, once large orders into the market to purchase, 100 yuan drop is not impossible, that is to say, based on the Shanxi factory price may fall to about 2100 yuan per ton.

Aluminium prices conventional decline is still the leading bearish

Recent price declines have been difficult to completely explained by supply and demand factors such as there are economic factors, and others, for the policy factors, both the supply factor, capital factor, can be said to fall beyond the normal range, but there is no doubt that bad atmosphere is still strong, the Yangtze river after prices fell below $11000 this week, to the key price 10000 yuan, Whether the pass can be held is not the key, the key is who can survive.