Inventories accumulate to high levels Aluminum prices will continue to come under pressure

The spread of the pandemic has put pressure on global economic growth, leading to the introduction
of countercyclical policies.
On March 3, the Fed urgently announced that it would cut its benchmark interest rate by 50 basis points and the excess reserve ratio by 50 basis points, and the RBA announced its interest rate decision to cut the interest rate by 25 basis points from 0.
75% to 0.
50%, a record low
.
Subsequently, Malaysia, Kuwait, Saudi Arabia, the United Arab Emirates, Jordan and other countries have successively cut interest rates, and Canada, the United Kingdom, Japan, and the European Central Bank have all announced that they will take necessary easing measures to stabilize financial markets
.
The domestic side has also continuously introduced tax and fee reduction policies and loose monetary policies, and the downstream resumption of work and production is also gradually advancing, which has a positive impact
on aluminum prices.

The epidemic has had a significant impact on alumina production, due to the poor transportation and resumption of work caused by the epidemic, the supply of bauxite, caustic soda and coal has been affected, resulting in the suspension of production of more than 5.
5 million tons of alumina enterprises in China, including Shanxi Xinfa, Xing'an Chemical, Qiping Xinfa, Weiqiao, etc.
have reduced production to varying degrees
.
Aladdin expects alumina production in February to be 5,376,500 tons, which translates to a daily output of 185,400 tons, down 1,560 tons from January, and is expected to continue to decline to about
183,000 tons in March.
The decline in alumina supply led to higher prices, and after the holiday, the price of alumina in Shanxi rose by 5.
5%, the cost of electrolytic aluminum rose, compressing the profit of electrolytic aluminum, and the current average profit of electrolytic aluminum has been near
the profit and loss line.

The output of electrolytic aluminum has not been greatly affected by the epidemic, and only some new production and resumption projects have been postponed, such as Xinjiang Xinfa, Hope Guyuan, Guangyuan Zhongfu, etc.
, but some planned projects have been put into operation in an orderly manner, such as Yun Aluminum Yixin, Yunnan Shenhuo, Wenshan Aluminum, etc
.
Overall, due to the characteristics of the production process, in the current small profit loss, the long-term large-scale production reduction is not expected to occur in March, and the production of electrolytic aluminum will continue to grow
.
According to Aladdin data, domestic electrolytic aluminum production is expected to be 2.
927 million tons in February, with a daily average of 100,930 tons, and the daily average production in March continued to increase slightly to 101,000 tons
.

Although with the promotion of domestic resumption of work and production, electrolytic aluminum consumption continues to improve, but the dilemma of raw material shortage will gradually ease, and alumina prices will face suppression
.
According to the survey, the transportation of alumina and bauxite has gradually resumed since the end of February, and the transportation in Shaanxi, Henan and other places has also become smoother
.
Bauxite mines in Sanmenxia, Pingdingshan and other places in Henan have begun production and will return to normal production capacity
in a week.

Ingot stocks are accumulating
.
Due to the weak downstream consumption and the improvement of automobile transportation, aluminum ingots in some factories are directly transported to downstream enterprises, resulting in a decline in outbound volume, and aluminum ingot inventory continues to accumulate
.
According to data from Shanghai Nonferrous Metal Network, as of March 5, domestic social stocks were 1.
488 million tons, an increase of 103,000 tons
from the previous week.
In terms of factory warehouse, with the growth of downstream resumption of work enterprises, the proportion of aluminum water in aluminum plants increased, and the amount of ingots decreased, and the aluminum ingots in the factory warehouse declined
.
However, because the terminal enterprises are still slow to start work and the downstream orders are limited, resulting in the accumulation of finished product inventory of aluminum processing enterprises, from the perspective of the industrial chain, aluminum ingots are just another form of inventory transfer
.

Overall, the continuous introduction of counter-cyclical adjustment policies at home and abroad and the rise in alumina prices have all contributed to aluminum prices, but in the case of growing electrolytic aluminum production, slow recovery of domestic consumption, and weakening of external demand due to the impact of the epidemic, aluminum ingot inventories have accumulated to a high level, and aluminum prices will continue to face pressure
in the future.