Policy expectations speculation heats up Shanghai aluminum futures trend strongly

In terms of news, the Xinjiang Changji prefecture government issued a document to stop the illegal electrolytic aluminum production capacity of three enterprises in the state 2 million tons, although the total amount is not large, but this is a clear policy signal, if the built capacity is stopped, then the possibility of the capacity under construction will not be affected, if the implementation of strict control of new production capacity, then the excess worry of aluminum will be greatly reduced
.
Pay attention to the possibility that the recent heating up of aluminum policy expectations will promote further increases in aluminum prices
.
Industry insiders said that under the control of new production capacity and rapid consumption growth, the industry is expected to gradually digest excess supply into tight balance or even shortage, thereby benefiting aluminum prices in the long run; The relevant capacity reduction policy also has a great
impact on prices.

On the supply side, after the large-scale reduction in production in the aluminum industry last year, aluminum prices rose, industry profits increased sharply, new production capacity was out of control, and the new and resumed production capacity reached 6 million tons
.
As of February this year, the production capacity reached 37.
5 million tons, and the average daily output increased by more than 20%
year-on-year.
Aluminum stocks are currently at 1.
2 million tonnes, recovering to their highest level in 2015, and the industry remains oversupplied
.
In addition, although the current top-level policy of capacity reduction has not yet been officially released, but according to industry speculation, most of the projects under construction this year may stop, the completed illegal projects or stop or replace, the scope of impact may be 2-3 million tons, the winter heating season production limit affects the output of 500,000-800,000 tons, if strictly implemented, the annual aluminum production capacity is basically stable and no longer increases
.

In terms of demand, the aluminum gap of 1 million tons in the market outside China, China needs to increase exports to make up, domestic aluminum consumption maintained rapid growth, aluminum consumption increased by more than 8% in 2016, lightweight and consumption upgrading for the aluminum industry to expand the application to provide huge space, aluminum consumption in 2017 is expected to maintain a high growth rate
.

Overall, the focus of the market in the later stage is the introduction and implementation of relevant policies of "cleaning up and rectifying illegal projects in the electrolytic aluminum industry", if the policy appears and is strictly implemented, the production capacity of 6-7 million tons expected at the beginning of the year may be seriously delayed, and this year's domestic supply is not excess but a supply gap
.
However, if the policy is compromised, there will still be some surplus
in the country this year.
In the former case, Shanghai aluminum may hit a new high, which does not rule out more than 16,000 yuan / ton; In the latter case, aluminum prices may maintain below 15,500 yuan / ton
.