Recently, the US dollar index has continued to climb, but the non-ferrous market has not fallen sharply, and the trend of variety differentiation is more obvious. As of the close of trading on the afternoon of August 24, the trends of Shanghai Aluminum and Shanghai Nickel in the non-ferrous sector were divergent. Among them, Shanghai aluminum futures continued to rise, closing up 2.66%, setting a one-and-a-half-month high; Shanghai nickel futures weakened all the way, closing down 2.03% on the day.
It is worth noting that the recent macro guidance for non-ferrous metals is relatively limited. Although the recent Fed officials have a hawkish attitude and the US dollar index has continued to strengthen, it has not significantly dragged down the trend of non-ferrous metals, and the trend of related varieties has returned to the fundamentals. Wu Haode, head of Changjiang Futures Guangzhou Branch, believes that there are two main reasons:
First, the previous round of sharp declines in non-ferrous metal prices has fulfilled the expectations of a global economic recession under the Fed rate hike cycle. Since July, the Fed’s hawkish interest rate hike attitude has eased, and the US inflation has turned a little bit, and the market’s expectations for forced interest rate hikes have been relatively moderate. Although the U.S. dollar index is still strong, the expectation of interest rate hikes may not stimulate the U.S. dollar index to continue to rise sharply. Therefore, the impact of the short-term strengthening of the US dollar on non-ferrous metals is marginally weakened, that is, non-ferrous metals are being “desensitized” to the US dollar in stages.
Second, the rising driving force of the non-ferrous metal market since August has mainly come from the domestic market. On the one hand, with the support of domestic policies, market expectations have improved; on the other hand, high temperatures in many places continue to lead to shortages of power supply, triggering production cuts at the smelting end, and pushing metal prices to rebound. Therefore, it can be seen that the inner disk is stronger than the outer disk, and the contrast between the internal and external strengths of aluminum prices is particularly obvious.
According to Hou Yahui, chief analyst of Shenyin Wanguo Futures Nonferrous Metals, August is still in the interim period of the Fed’s macro interest rate hike cycle, and the impact of macro factors is relatively weakened. The recent non-ferrous metal prices mainly reflect the fundamentals of the varieties themselves. For example, copper and zinc with strong fundamentals are in a continuous rebound trend. As the supply side is stimulated by news of simultaneous production cuts at home and abroad, aluminum has recently broken again. For varieties with weak fundamentals, such as nickel, after rebounding in the previous stage, the pressure above will be more obvious.
At present, the non-ferrous metal market has entered a period of consolidation, and the influence of the fundamentals of various varieties has rebounded. For example, zinc and aluminum profile manufacturers in china have been affected by energy problems in Europe, and the risk of production reduction has increased, while domestic aluminum production has also been affected by local power cuts. The risk of production cuts has increased. Moreover, non-ferrous metals continue to be affected by low inventories and low supply elasticity. When global liquidity is still relatively abundant, supply-side disturbances are easy to attract market attention.” Founder mid-term futures analyst Yang Lina said.
However, Yang Lina reminded that the market needs to pay attention that the annual meeting of global central banks in Jackson Hole, known as the “barometer” of policy turning points, will be held from August 25 to 27, and Fed Chairman Powell will be held on Friday 22 Beijing time. point to speak on the economic outlook. At that time, Powell will elaborate on inflation performance and monetary policy measures. It is expected to emphasize that the U.S. economy and labor market are still strong, and inflation is unacceptably high, and monetary policy still needs to be tightened to respond, and the pace of interest rate hikes will continue. Adjusted for economic data. The information announced at the meeting will still have a greater impact on the market. She said that the current market trading rhythm alternates between tightening liquidity, stagflation, and recession expectations. Looking back, it can be found that the performance of the non-ferrous metal market is still slightly better than other assets in a similar environment.
Looking at the aluminium profile suppliers, analysts believe that the recent increase in domestic and foreign supply-side disturbances has brought obvious short-term support. Yang Lina said that at present, the domestic aluminum supply side is affected by high temperature power cuts, and the production capacity continues to decrease. In Europe, aluminum production capacity has also been cut again due to energy problems. On the demand side, processing companies are also affected by power curtailment and the operating rate has dropped. With the continuation of the off-season of consumption and the deterioration of the external environment, the order situation of the processing industry is relatively weak, and the recovery of terminal consumption will take time and more stimulus measures. In terms of inventories, social inventories have accumulated a small amount of negative aluminum prices.
Specifically, Hou Yahui told reporters that in addition to the production reduction caused by energy problems, workers at Hydro’s Sunndal aluminum plant in Norway have recently started a strike, and the aluminum plant will stop production by about 20% in the first four weeks. At present, the total production capacity of Sunndal Aluminum Plant is 390,000 tons/year, and the strike involves about 80,000 tons/year.
Domestically, on August 22, the power curtailment requirements of Sichuan Province were upgraded again, and all electrolytic aluminum enterprises in the province basically stopped production. According to statistics, there are about 1 million tons of electrolytic aluminum operating capacity in Sichuan Province, and some enterprises have started to reduce load and let electricity to the people since mid-July. After August, the power supply situation became more severe, and all electrolytic aluminum production capacity in the region has been shut down. Chongqing, which is also in the southwest, is also in a tense situation in power supply due to high temperature weather. It is understood that two electrolytic aluminum plants have been affected, involving a production capacity of about 30,000 tons. He said that due to the above-mentioned supply factors, there have been some changes in the loose pattern of aluminum fundamentals. In August, the excess pressure on the supply side of electrolytic aluminum was temporarily suspended, which formed a certain support for prices in the short term.
“How long the strong performance of aluminum prices can last mainly depends on the duration of the strike at overseas aluminum plants and whether the scale of production reduction due to energy problems will be further expanded.” Yang Lina said that the longer the supply relative to demand continues to be tight, the impact on aluminum prices will be. The greater the impact on the balance of supply and demand.
Hou Yahui said that with the end of the summer vacation, the continuous high temperature weather in the southwest region is expected to gradually come to an end, but it will take some time for the power problem to be alleviated, and the production process of electrolytic aluminum determines that the restart of the electrolytic cell will also take some time. He predicts that after the power supply of electrolytic aluminum enterprises in Sichuan Province is guaranteed, it is expected that all production capacity will be restarted at least about a month.
Wu Haode believes that the aluminum market needs to pay attention to the following factors: In terms of supply and demand, the power cut in Sichuan directly leads to the reduction of 1 million tons of production capacity and the delay of 70,000 tons of new production capacity. If the impact of the shutdown lasts for one month, the aluminum output may be as high as 7.5%. tons. On the demand side, under the favorable domestic macro policies, credit support and other aspects, there is a marginal improvement in consumption expected, and with the advent of the “Golden Nine Silver Ten” peak season, there will be a certain increase in demand. Overall, the fundamentals of aluminum supply and demand can be summarized as: the supply margin decreases, the demand margin increases, and the balance of supply and demand throughout the year improves.
In terms of inventory, the current LME aluminum inventory is less than 300,000 tons, the previous aluminum inventory is less than 200,000 tons, the warehouse receipt is less than 100,000 tons, and the domestic electrolytic aluminum social inventory is less than 700,000 tons. “The market has always said that 2022 is the year when electrolytic aluminum is put into production, and this is indeed the case. However, if we look at the reduction in the production capacity of aluminum next year and in the future, the operating capacity of electrolytic aluminum is constantly approaching the ‘ceiling’, and the demand remains stable. In the case of growth, whether there is an inventory crisis in aluminum, or whether the market may have begun to trade, this needs attention.” He said.
In general, Wu Haode believes that the aluminum price will be optimistic in the “golden nine silver ten”, and the upper height sees 19,500-20,000 yuan / ton. Regarding whether the aluminum price will rebound strongly or idling in the future, we should pay attention to the substantial improvement of consumption and the room for supply disturbance.
Post time: Sep-02-2022
