Macro sentiment has improved, and the aluminum market is bullish

The performance of aluminum ingot social inventory exceeded expectations, down 112,000 tons from last week, while factory warehouses also declined
.
On the one hand, the operating rate of aluminum processing enterprises returned to a high level, and the recovery of domestic terminal consumption automobiles, real estate and other fields improved domestic demand, on the other hand, the shortage of domestic scrap aluminum supply and the continuous low level of aluminum prices made recycled alloy enterprises turn to the purchase of aluminum ingots to maintain a high level, driving primary aluminum consumption, superimposed on the supply side for the price and cover the behavior, multiple factors caused by the decline in aluminum inventory
.

At present, the improvement in domestic demand is more obvious, in April there are still some in the completion of the previous backlog of orders, domestic orders performance is acceptable, but some export orders are greatly affected by the epidemic, especially the suspension of overseas automobile manufacturing and aluminum processing enterprises has made the relevant aluminum export orders decline significantly, and the overall China's aluminum consumption is still facing downward pressure
year-on-year.

On the supply side, last week, one smelter actively reduced its general production capacity (230,000 tons), and three smelters continued to announce maintenance shutdowns, with a cumulative announced production reduction and maintenance shutdown capacity of more than 880,000 tons, and the further expansion of supply reduction production level further narrowed the oversupply and demand situation
.

On the cost side, alumina prices continued to decline during the week, but in the case of a gradual rebound in aluminum prices, sellers were more willing to turn to higher prices, so the downward trend slowed down, while overseas alumina also performed steadily, without further suppression
of domestic alumina prices.
At present, under the influence of prices, alumina production capacity is also facing production reduction pressure, and domestic supply is still tight, but the continuous low level of overseas alumina still puts pressure on the bargaining power
of alumina plants.
At the same time, demand has declined due to the continuous reduction of smelter production, the contradiction between supply and demand shortage is not prominent, and the upward momentum of alumina prices is insufficient
.

On the whole, the recent sharp improvement in fundamentals, especially the unexpected destocking, has released bullish sentiment in the market, and the expansion of supply cuts has also improved the oversupply and demand situation, but due to the continuous decline in alumina prices and the collapse of costs, smelter production profits have been repaired and have returned to near breakeven
.
The destocking is actually a combination of many factors, and with the gradual digestion of backlog orders and the emergence of export impact, destocking is difficult to sustain, and due to the improvement of profits, smelters' willingness to reduce production has declined, which is not conducive to the adjustment of oversupply and demand, so aluminum prices will still fall
.