Aluminum prices fluctuated sideways in June

According to the Commodity Market Analysis System of Business Society, the average price of aluminum ingots in the East China market on June 29, 2023 was 18566.67 yuan/ton, an increase of 0.83% compared to the aluminum price of 18413.33 yuan/ton at the beginning of the month (June 1).

In the long term, the current price is in the sideways range after a high price decline, and has been fluctuating in the range of 17500 to 19500 yuan/ton.

Overview of Fundamentals

Supply side: Yunnan Power Grid has fully relaxed the management scale of 419.4 kilowatts of load since June 17th. Yunnan Province has convened representatives of local aluminum factories to discuss and resume production from June 20th. The release of power load can support the start-up of approximately 1.3-14 million tons of electrolytic aluminum production capacity. Some electrolytic cells have been restarted, but due to the impact of its own process, it will still take 1-3 months to increase production, and the pressure is expected to gradually reflect after July. At present, a few enterprises have started to power on and resume production. According to current information, it is expected that the first batch of production capacity to resume in the province will be around 1.1 million tons. Based on the distribution of load and the boost of market policies on the consumer end, the production capacity is expected to increase in the future. Last year, Yunnan stopped production of 2 million tons due to the impact of hydropower. If the news is true, it indicates that the process of resuming electrolytic aluminum production capacity in Yunnan is accelerating. But as the summer electricity peak approaches, the space for resuming production may be limited.

As of June 25th, the social inventory of domestic electrolytic aluminum ingots reached 527000 tons, a decrease of 26000 tons compared to the beginning of the month and a decrease of 224000 tons compared to the same period in June 2022. The aluminum ingot factory warehouse has also undergone a small inventory reduction, and the overall inventory is still in the stage of inventory reduction. However, the pace of inventory reduction has significantly slowed down compared to May.

On the demand side: The weekly operating rate of downstream processing enterprises is expected to decrease month on month, and there may be no significant improvement near the off-season in the future.

Import and export: According to the latest data from the General Administration of Customs, from January to May, downstream aluminum profiles exported a total of 377100 tons, an increase of 3.03% year-on-year. Among them, the export volume of aluminum profiles in May was 820500 tons, an increase of 2.45% year-on-year and 1.77% month on month, with a slight increase compared to the same period in previous years.

In summary, aluminum ingot inventory is still at a historical low, and Yunnan production is expected to release. From a cost perspective, the support for aluminum oxide cost is weak, and it is currently in the stage of intensified long short game. In the future, it is expected that Qinghai will restrict electrolytic aluminum production due to the summer electricity peak, and Yunnan will continue to suffer from drought. It is expected that power supply will be tight this summer, which will have a negative impact on electrolytic aluminum production. It is expected to maintain a broad oscillation operation in the short term.