Market Review
Bauxite: The Start of Domestic Bauxite Mines Is Expected to Resume in July, And Orders for Imported Mines Are Re-Negotiated

This week, the supply of domestic mines in Shanxi and Henan continued to be tight. Due to continued supply tightening, prices in Henan increased slightly. In Shanxi, due to the iron ore seepage accident, all underground mines were shut down, and some open-pit mines were shut down, resulting in a decrease in short-term output. However, most companies have relatively sufficient inventory reserves, and some companies can use imported mines instead. Therefore, the shortage of ore has not affected the production of local alumina enterprises. The supply of domestic mines in Guangxi and Guizhou is relatively sufficient, and there is no shortage of supply in the market.

The incident that had the greatest impact on the production of domestic mines in June was the water seepage accident in the iron ore mines in Shanxi. All underground mining mines in the area ceased production, and the open-pit mines have also undergone safety inspections. Therefore, the supply of domestic mines was still tight in June. The production of domestic mines throughout the first half of the year was restricted by a variety of factors. Starting from February, they experienced the Spring Festival, the epidemic, the two sessions, environmental protection, safety inspections, and the celebration of the 100th anniversary of the founding of the party. Compliance mines have been suspending production for rectification. Among them, Shanxi and Henan have been affected more obviously, but only the Henan area is obviously in short supply of ore. In April, enterprises cut production or stopped production due to the shortage of domestic ore, and the price of ore also increased. Some companies allocate or use ore from Shanxi.

Imported mines are calmer, ocean freight rates have returned to high levels, and freight rates in several major importing countries have not changed much. Imported ore bulk transactions are still very few and have no impact on the market. Many companies new long-term bargaining will not start until July. Therefore, the current imported bauxite prices remain stable. However, at the end of July, due to the celebration of the 100th anniversary of the founding of the party, the production capacity of some mines and alumina enterprises was reduced, and some production capacity was compressed, but it was only a short-term compression, which had little effect on the overall June.

The supply of imported mines is still sufficient, most of the supply is locked in long-term orders, and prices are basically negotiated at the beginning of the quarter. There are relatively few transactions in bulk, which does not have much impact on the market. From the perspective of port inventory, the port’s inventory in June was still above 30 million tons, which can supply most companies’ inventory supplies in March or even above. In early July, some companies’ long-term orders will be renegotiated. However, according to Aladdin’s understanding, some buyers expect that the price will be the same as the previous price. Under the background that there is no room for the price of alumina to rise, it is difficult for imported miners to negotiate higher prices.

In May, China's bauxite imports reached 9.113 million tons, an increase of 4.27% from the previous month, but a decrease of -5% year-on-year. Among them, the import volume of Guinea region increased more in May, with a year-on-year increase of 26% and a month-on-month increase of 9.9%, While the ore in Australia and Indonesia decreased year-on-year by -25% and -32% respectively. Judging from the consumption of imported ore in the first five months, due to the tight supply of domestic ore in Shanxi and Henan, the demand for imported ore from various alumina plants is still very stable with a small increase. The long-term orders of the manufacturers are basically being executed as usual. Although the ocean freight has doubled since February, it has not had a great impact on the import volume. It is only a small part of the trade mine that is difficult to enter. The export volume of bauxite from the three main countries still dominates, and the import volume in June is not expected to fluctuate greatly.

From January to May, the domestic bauxite import volume was close to 45 million tons, a decrease of 5% compared to last year. With the increase in the consumption of imported ore in the first half of the year, the company’s imported ore inventory and port inventory decreased.

In summary, the current domestic supply of bauxite is slightly tight. It is not known whether the mines that stopped production in Henan and Shanxi in July will resume normal production. The supply of domestic ore will remain tight, and the supply and demand of imported mines will remain very stable. The supply and demand of ore are basically in a balanced state, and it is difficult for the slight imbalance caused by various reasons to have a great impact on the price.

Alumina: The Price Has an Upward Trend, The Range Is Still Limited

Market Review

The alumina market was relatively active this week, and the benchmark price of Shanxi and Henan transactions moved up 5-10 yuan to about 2,480 yuan. As of this Friday, the northern comprehensive price of ALD is 2470-2500 yuan/ton, the weekly average price is the same month-on-month; the domestic spot weighted price is 2482.1 yuan/ton, the weekly average price is the same.

Premium Quotations of Major Companies

Active transactions are more related to the slight upward movement of the benchmark price of the northern rigid demand. Due to the general maintenance of major alumina companies and the firm quotations, the benchmark price of northern rigid demand moved up from 2,470 yuan to 2,480-2490 yuan. The sellers whose benchmark quotations have moved up are mainly large alumina companies. On the one hand, they have relatively strong shipping guarantee capacity, and on the other hand, the supply volume is highly implemented within the contract period. Moreover, these companies have their own industrial chains and have a large proportion of them. Single, the urgency of spot sales is not strong. The discounted foreign exchange rate of such sales companies is generally between 2480-2500 yuan.

Market Makers Enter The Market Infrequently

According to ALD, due to the tight execution of long-term orders of major alumina companies, signs of active spot trading have reappeared, and market-making institutions have begun to enter the market in an orderly manner. At present, market makers in Shanxi-Shandong, Shanxi-ports, and north-south regions have started low-frequency balance trade through regional or time differences. Due to different freight rates, different market-making intentions, and financial cost calculations, the transaction price is mostly between 2550-2600 yuan, and the transaction volume has reached more than 15,000 tons. At present, the absolute demand for goods in the market has not yet been fully active, but the search for goods between trades is relatively active, especially in the alumina market of imports and Shanxi, where the trade volume of the difference formed by the demand for freight and time difference is constantly expanding. This move can relatively control the spot liquidity during the cycle. On the one hand, it supports or even boosts the port and Shandong prices, and on the other hand supports the prices in Shanxi and Henan.

Exports Support Guangxi Prices

Aladdin understands that the southwest market, especially the Guangxi market, had the actual and expected downward pressure on alumina demand caused by the power curtailment in Yunnan in the early stage. Later, there was the actual and expected alumina demand brought by Huasheng’s overproduction and Guangzhou Aluminum and Longzhou Xinxiang’s commissioning. With increasing supply pressure, concerns about the transportation of goods from the south to the north have also begun to increase, but the market appearance of time-cycle factors has not yet been obvious. However, recently, the export of alumina in Guangxi market has reappeared, which has played an effective role in alleviating local pressure during the period. Aladdin understands that Guangxi exported at least 30,000 tons of alumina to the Middle East in mid-June. There are still at least 30,000 tons of alumina exports this month, and the FOB port price is roughly around 2,480 yuan.

Market Outlook Forecast

The short-term trend is upward, but the benchmark price of Shanxi and Henan is still facing a strong resistance of 2500 yuan. Market flat water and discount transactions occur from time to time, large-scale inspections are gradually reduced, favorable market-making conditions are insufficient, and prices are difficult to change significantly. The northern price mainly moves up slowly and slightly, and more is a cycle of gaining momentum. It is good for long-term orders but it is difficult to promote active trade involvement.

Figure 1 Weighted Price Trend of Domestic Spot Alumina

Data Source: ALD

Aluminum Hydroxide: The End of The Spot Rally

Market Review

The rise of aluminum hydroxide ended this week, and the pricing of leading companies is still increasing, but the price of new spot orders remains stable. ALD researched and learned that as of this Friday, some spot prices in Shandong have risen by 5 yuan/ton, and the price is referenced to 1,600-1620 yuan/ton; the negotiation in Shanxi is stable, and the price is referenced to 1590-1610 yuan/ton; inventory pressure in Henan is smaller, smooth shipments, the price is referenced at 1590-1600 yuan/ton; the center of gravity in Guangxi remains stable, and the price is referenced at 1570-1580 yuan/ton; Guizhou continues to rise weakly, and the price is referenced at 1570-1580 yuan/ton.

Outlook Forecast

ALD believes that the recent bullishness of aluminum hydroxide comes from the previous uptrend of alumina and the trend reduction brought about by the tight bauxite minerals, and some leading companies continue to raise their quotations to support the shipment mentality. The bad news still comes from weak demand. Long-term purchases of water purifiers and glass fillers are maintained. Although aluminum fluoride has resumed sporadic production, the current situation of production cuts and shutdowns has not improved, and the overall operating rate is still low. The short-term market is positive and negative, and the market consolidation is the main factor, but the long-term operation is under pressure.

Aluminum: Demand Shifts in Phases, Aluminum Prices Fluctuate and Adjust

Compared with the strength of the external disk, the domestic aluminum market continued the previous shock adjustment trend this week, and the shock range narrowed to 18500-19000 yuan/ton. The characteristics of the off-season have further emerged, mainly due to restrictions on safety inspections and environmental inspections received in multiple links around the centennial anniversary of the founding of the party, coupled with transportation constraints, the demand in the middle and lower reaches has significantly weakened, and the dominant inventory of aluminum ingots has therefore rebounded slightly. In addition, across the end of the month and mid-year this week, financial pressures coupled with dumping of reserves have begun to warm up, and poor spot market trading has also dragged down the shock adjustment of aluminum prices.

Relatively Limited Short-Term Output Growth

After entering June, as the Wudongde Hydropower Station, Baihetan Hydropower Station, and Yangfanggou Hydropower Station were put into operation one after another, the tight situation of industrial power consumption in Yunnan has improved significantly, and orderly power consumption has gradually ended. However, given that electrolytic aluminum is a high-energy-consuming industry, on the basis of the arduous task of dual energy consumption control, the policy does not allow aluminum companies to quickly resume production. According to our investigation, the pace of resuming production of electrolytic aluminum enterprises in Yunnan is relatively slow. At present, only a small number of electrolytic cells in individual projects have been gradually started. Other projects with new production capacity plan to start new production capacity first, and the production of electrolytic cells will be stopped after the evaluation is completed. Circumstances then formulate a resumption plan. In other regions, in addition to Shanxian Hengkang and Gansu Zhongrui, Qinghai Xinheng and Shanxi Zhaofeng also announced their participation in the resumption of production. However, considering the different status of their electrolytic cells, plus the initial irrigation for the aluminum process, it is expected that the above-mentioned projects may not contribute significantly to the market in the short term.

Destocking Will Continue In The Short Term

Statistics show that since the end of March, after 12 cycles of decline, the total domestic aluminum ingot social inventory rebounded for the first time in early July, mainly due to the short-term results of large-scale commemorative events aggravating the off-season characteristics. However, judging from the overall performance of the inventory in the first half of the year, on the one hand, the current inventory peak is about 500,000 tons lower than last year, mainly due to the low proportion of ingots this year; on the other hand, the current total inventory of nearly 900,000 tons is lower than that of last year. The same period last year was nearly 150,000 tons higher, reflecting the relatively slow pace of destocking since the first half of the year. The reason is that aluminum prices continued to hit high levels in the first half of the year, and the midstream and downstream were not enthusiastic about receiving orders. While digesting the original inventory, they basically maintained just-needed purchases. However, in the case of limited dumping of reserves and low ingot casting ratio, it is expected that the social inventory of aluminum ingots will return to a downward trend in the later period, but the rate of decline is still difficult to increase significantly.

In summary, it is expected that the domestic electrolytic aluminum market will continue to fluctuate and adjust in the short term, and the pressure above 19,000 yuan/ton still needs attention.

Aluminum Bar: Aluminum Prices And Processing Fees Are Weak, And The Market May Change Slightly Next Week

Market Review

Under the influence of various factors, Shanghai Aluminum and aluminum bar processing fees showed a double-weak trend this week. Shanghai Aluminum continued to decline after hitting the 19000 marks at the beginning of the week, and London Aluminum went out of the opposite market. However, the processing fee for aluminum rods in major consumption areas fell below the 300-yuan mark, and the market is weak and the mentality of following is more obvious. However, next week's influence factors may become clearer, and the pattern of Shanghai's weak and strong ties may change.

The Off-Season Characteristics Of Aluminum Rod Processing Fees Are Highlighted

Near the middle of the year, the straight decline in aluminum rod processing fees in major domestic consumption areas is obvious. At present, the Baotou aluminum rod appearance fee has dropped to 100 yuan or even lower, the aluminum rod processing fee in North China has dropped to around 300 yuan, and the aluminum rod processing in East China The price quotation is more confusing, the low level has dropped to 350 yuan or even lower, and the processing fee for some aluminum rods in South China has dropped below 300 yuan. Some manufacturers have reported that the big stick even appeared close to 200 yuan. Under the influence of the mentality of some traders, the straight drop pattern of aluminum bar processing fees is more obvious. Although the weakness of aluminum bar processing fees is related to the semi-annual report capital flow, credit review and other factors, the sudden decline in terminal demand may not be one of the reasons.

Security Inspection Issues Cause Many Aluminum Processing Companies To Stop Production

Recently, ALD investigated and learned that, represented by cable and aluminum profile companies, in addition to the suspension of production due to the 100th anniversary celebration in the Beijing-Tianjin-Hebei region, there are also some primary aluminum processing companies in Qinghai, Xinjiang, etc. Obviously, production cuts and shutdowns caused by environmental protection and safety inspections are more obvious. According to the situation of ALD, some aluminum processing enterprises in Qinghai have started to resume work after completing some security procedures; however, some aluminum primary processing enterprises in Xinjiang have started to reduce and stop production due to security issues.

Key Prices

Aladdiny (ALD) Statistics