Aluminum prices fell by 0.4% in February
According to the Commodity Market Analysis System of Business Society, aluminum prices fell by 0.4% in February 2024. As of the 29th, the average price of domestic aluminum ingots in the East China market was 18876.67 yuan/ton, a decrease of 0.4% compared to the average price of 18953.33 yuan/ton in the East China market at the beginning of the month (February 1st).
In the long term, the current price is in the “M” type price state since the second half of 2023, and the price level has been in the upper middle level in the past year.
Periodic accumulation of aluminum ingots in February
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As of February 29th, the inventory of electrolytic aluminum in the main domestic market was 815000 tons, which is 449000 tons compared to the beginning of the month (February 1st). The accumulated inventory during the month was 366000 tons, of which 167000 tons were accumulated during the Spring Festival holiday. Based on historical inventory data, the current inventory level is at a low level in the same period in history. However, compared to the month on month data, the accumulated inventory of electrolytic aluminum before and after the holiday is at the middle level in history.
Overview of aluminum ingot fundamentals in February
Returning after the holiday, the power outage incident at an aluminum plant in Inner Mongolia may affect production capacity, and actual production changes are limited; In the southwest direction, Yunnan has good precipitation, and the hydroelectric power generation may drive the resumption of a small amount of electrolytic aluminum production capacity in March. Yunnan’s early production reduction has been basically completed, and the risk of subsequent production reduction is relatively small. It is expected that Yunnan’s production will steadily increase slightly before the rainy season, with little variation. In terms of policy, although the latest round of sanctions imposed by the United States on Russia includes aluminum industry manufacturers, it does not directly involve Russian aluminum, and the news is generally disturbed.
Factors influencing the future trend of aluminum prices
On a macro level, there is some hedging of domestic macro factors. The annualized quarter on quarter correction of the core personal consumption expenditure (PCE) price index in the fourth quarter of the United States was 2.1%, exceeding expectations by 2%. While the PCE was revised upwards, the actual GDP in the fourth quarter of the United States unexpectedly decreased to 3.2%, which was lower than expectations. The Federal Reserve’s swap rate shows that the Federal Reserve is likely to only cut interest rates by 75 basis points in 2024, and investor expectations for the magnitude of rate cuts by the Federal Reserve and the European Central Bank continue to weaken.
On the domestic side, the central bank has lowered the benchmark loan interest rate LPR again after eight months. The People’s Bank of China authorizes the National Interbank Funding Center to announce that on February 20, 2024, the loan market quoted interest rate (LPR) is 3.45% for 1-year LPR and 3.95% for 5-year and above LPR. The former remained unchanged compared to the previous period, while the latter decreased by 25 basis points compared to the previous period. Lowering the medium – and long-term LPR benchmark interest rate will help reduce the pressure on residents to purchase properties and repay existing housing loans, which is conducive to further promoting investment and consumption.
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2. On the supply and demand side, after the Yuanxiao (Filled round balls made of glutinous rice-flour for Lantern Festival), the downstream consumption gradually recovered, the automobile and photovoltaic sectors started to work fairly well, and the construction sector’s operating rate also began to rise at a low level recently. The overall demand has improved.
3. On the cost side, changes in the price of raw alumina. In the short term, with loose expectations for ore supply, especially some alumina production enterprises in Shanxi and Henan regions in China actively promoting mine resumption, short-term cost support is average.
Future Market Forecast
The traditional peak season for consumption is approaching, and downstream demand may improve. The production capacity and operating rate of aluminum profiles, aluminum cables, aluminum plates and strips, aluminum foils, primary aluminum alloys, and recycled aluminum alloys are gradually recovering with the resumption of production and work. The pressure on aluminum ingot inventory accumulation may weaken in the future, and spot transactions are expected to improve from the current light. It is expected that aluminum prices will experience strong fluctuations in March.
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