On April 6, gehonglin, President of China Nonferrous Metals Industry Association, said: “recently, relevant departments of the state have studied the implementation plan of carbon peak in nonferrous metal industry (hereinafter referred to as the” scheme “), and are seeking opinions from industry associations and enterprises《 The plan initially proposes that the non-ferrous metal industry should strive to achieve the peak carbon by 2025 and reduce carbon by 40% by 2040, which will be at least five years ahead of the national peak carbon. ” Setting specific carbon peak targets for the industry will force enterprises to strictly control new capacity and adjust the existing capacity layout.
The relevant departments in China have repeatedly emphasized that the capacity of electrolytic aluminum will be strictly controlled with the capacity of 45million tons of “ceiling”. According to relevant data, by the beginning of April, the annual operating capacity of electrolytic aluminum in China was 39.44 million tons, the effective built capacity was 43.59 million tons / year, and the operating rate of electrolytic aluminum enterprises in China was 90.5%. At present, there is not much space for new capacity investment, while the operating rate of existing capacity is on the high side, so there is little space for output increase. Since the beginning of this year, the market’s worry about oversupply has weakened, while the worry about supply shortage after next year has gradually increased.
Since the development and Reform Commission of Inner Mongolia Autonomous Region issued several safeguard measures (Draft for consultation) to ensure the completion of the energy consumption double control objectives in the 14th five year plan, several electrolytic aluminum enterprises in Inner Mongolia have successively reduced production, involving about 300000 tons of production capacity. By the end of February, Inner Mongolia had an operating capacity of 5.98 million tons, with a production reduction of about 5%. Similar to Inner Mongolia, the ecological environment of Xinjiang is fragile in China, and the power link of electrolytic aluminum enterprises is mainly thermal power production. At the end of February, the operation capacity of electrolytic aluminum in Xinjiang was 6.18 million tons, which exceeded Inner Mongolia. On April 13, it was rumored that Xinjiang would limit production to some aluminum enterprises, and the aluminum price rose to 18000 yuan / ton for a time. Although many parties have confirmed that the main aluminum enterprises in Xinjiang have not yet received the notice of production reduction, the aluminum price has not fallen. Xinjiang’s policy of reducing production may be on the way.
In addition to reducing the existing operating capacity, the difficulty of new capacity landing also worries the market that the supply will be further tightened in the future. In early February, Inner Mongolia development and Reform Commission and the Ministry of industry and information technology issued a notice to adjust some industry price policies and power market trading policies. Among them, since February 10, 2021, the self-contained power plant pays policy cross subsidy according to the spontaneous self-use power consumption. The collection standards of Mengxi and Mengdong power grid are respectively 0.01 yuan and 0.02 yuan per kilowatt hour (including tax). The basic electricity price policy of 3.39 minutes per kilowatt hour in the electrolytic aluminum industry in Mengxi area is cancelled, and the reverse step transmission and distribution price policy of Mengxi power grid is cancelled. Through the price adjustment, the production cost of electrolytic aluminum enterprises has been continuously improved. According to the original plan, 1.35 million tons of new production capacity will be put into operation in Inner Mongolia from 2021 to 2022. However, it is doubtful whether the new capacity can be put into operation as planned by the government through administrative and market adjustment measures to restrict the expansion of Inner Mongolia production capacity. In addition to Inner Mongolia, Guizhou, Shandong and other places have issued new capacity projects that are prohibited from electrolytic aluminum industry, which are replaced but not completed or will be put on hold.
Under the condition of limited supply of aluminum, consumption has improved seasonally, and the social inventory of aluminum has declined rapidly. On April 15, the social inventory data of major consumer places such as Shanghai, Wuxi, Hangzhou, Nanhai and Gongyi published by SMM showed that the total weekly inventory was nearly 45000 tons, and the total inventory is at a low level in the same period in recent years. Globally, LME inventories have also continued to decline since late March. With the sustained recovery of manufacturing industry in Europe and America, the demand for industrial products has recovered. Since April, the water rise of Europe and Alcoa has reached the highest since June 2019 and may 2018 respectively. Tight supply in the spot market also boosted long-term confidence.
Looking forward to the second quarter, we believe that domestic aluminum demand will still improve seasonally. Meanwhile, with the launch of vaccination and economic stimulus plans, overseas demand will also rise simultaneously. From the supply side, with China’s aluminum industry speeding up the implementation of the carbon peak target and the promotion of the “double control” policy of local government energy consumption, the aluminum market is facing a situation of tight supply. China’s aluminum production accounts for about 60% of the world’s total. China’s efforts to curb carbon emissions have affected the global market nerves and laid the groundwork for a substantial rise in aluminum prices. We expect that the domestic inventory will continue to be removed in the second quarter, the supply gap will gradually expand in the future, aluminum price will be easy to rise and fall, the price center will continue to move up, and aluminum price will even impact the 20000 yuan / ton level（ Author: Dongwu futures)