Aluminum prices are still dominated by shocks, and the center of gravity of trading has not changed much

Social inventory "eastward", aluminum spot discount.

Since February, the most significant change in the aluminum market is that the aluminum ingot inventory accumulated in Xinjiang continues to "move east", and the total aluminum ingot inventory counted by SMM has soared from 350,000 tons at the beginning of the year to 1.
1 million tons in mid-March, which makes the aluminum spot discount amplified compared with the futures price, because the Shanghai aluminum market shows a clear positive price difference arrangement, and the aluminum ingot delivery volume participating in the 1703 contract period spot arbitrage is larger
.
In view of the high inventory in the consumption place, the state of spot discount will continue, from the comprehensive consideration of industrial changes, inventory consumption, and price expectations, the unilateral opportunity space of the aluminum market in the second and third quarters is limited, and the price difference opportunity of "buying near and selling far" is relatively clear
.

The revision of the rules of aluminum ingots in the previous period will help to cultivate value preservation and arbitrage trading
.
At the end of 2015, the aluminum price bottomed out, and the position of Shanghai aluminum varieties has always remained at a high level, and there has been no significant shrinkage due to the price turning oscillation, indicating that the value preservation and arbitrage functions of the aluminum market have continued to be played
。 In 2016, the Shanghai Futures Exchange approved aluminum ingots produced by Shandong Hongqiao, Qinghai Qiaotou and Huanghe Xin Industry as delivery varieties; At the end of the year, the designated delivery warehouses for aluminum futures will be extended to Shandong, Henan, Tianjin and Chongqing, and different degrees of discounts will be set up respectively, which will enrich the choice of delivery warehouses and help enterprises maintain value and deliver; In March, the aluminum futures contract was revised, adding 25 tons to the aluminum ingot delivery heavyweight, laying the foundation
for further expansion of domestic and diplomatic cutting brands.
From the perspective of market cultivation, the richness of delivery brands and delivery warehouses is conducive to the preservation of value in the aluminum market and the heating up of arbitrage transactions, and the fluctuation of the future-spot price spread is more frequent, and the trend opportunity is more obvious
.

Supply-side reform is the most important
to control aluminum production capacity.
In the first two months of this year, China's electrolytic aluminum production increased by 15.
6% year-on-year to 5.
49 million tons, and the full release of Xinjiang's production capacity is an important factor in the expansion of
production.
According to institutional statistics, the scale of new electrolytic aluminum production capacity in 2017 will reach 4.
62 million tons, and in 2016, the domestic electrolytic aluminum production capacity is expected to be 41.
7 million tons, further expansion and release, and the new production capacity is mainly put in low energy cost areas, which will give more pressure on aluminum prices, and the center of gravity of price trading may be moved back to the cost range
.
At the same time, with the expansion of alumina production capacity and the re-intervention of Indonesian bauxite, the cost range of aluminum prices has another downward pressure, which is also the biggest worry
that aluminum prices cannot get out of the upward trend this year.
The supply-side reform controls the speed of primary aluminum production capacity launch, which is crucial
to the support of aluminum prices in 2017.
We believe this will happen in the second half of the year, especially in the fourth quarter
.
On the one hand, the current consumer environment is in the peak season, and the market willingness is dominant; On the other hand, the implementation of supply policy reform will play a role when necessary, in 2016, the capacity utilization rate of the domestic electrolytic aluminum industry is roughly 77%, and the target of eliminating backward production capacity in 2017 exceeds 3 million tons
.

Most importantly, from the perspective of environmental protection, the "2017 Air Pollution Prevention and Control Work Plan for Beijing-Tianjin-Hebei and Surrounding Areas" was introduced, and the "2+26" cities around Beijing limited the production of electrolytic aluminum plants by more than 30% during the winter heating season; Alumina production is limited to about 50%; Carbon enterprises, if they fail to reach the special emission limit, all stop production, and if they reach the special emission limit, the production limit is more than
50%.
According to preliminary estimates, limiting production by 50% in the heating season means that the completed production capacity will be as high as 14.
835 million tons, accounting for 19.
6% of the country's total production capacity, and the reduced operating capacity will reach 14.
05 million tons, accounting for 20%
of the country.
If we calculate the heating season in Beijing for about four months, the production in the heating season will be reduced by about 4.
7 million tons
.

Comprehensively considered, the growth rate of electrolytic aluminum production in 2017 will also be clearly affected by administrative policies, and the growth rate of output may be high and low
.
In this context, the change of social inventory may show strong regularity and strong control
.
In the first half of the year, the active production of electrolytic aluminum may lead to a further increase in social inventory, and in the middle and third quarters of the year, it is mainly digested, and in the fourth quarter, the inventory of consumption places is at a low level
.

Looking forward to the future market, in the second quarter, aluminum prices are expected to maintain the current trading focus, affected by the overall warmer atmosphere of non-ferrous metals in the first half of the year, aluminum prices will not have a significant decline, but the positive rise in production will continue to put pressure on spot prices, futures spot arbitrage, positive market arbitrage opportunities still exist
.
It is expected that the center of gravity of the main contract aluminum price in the second quarter will be 13,500, with an oscillation range of 1.
3-14,500
.
The spread trend is more clear
.