Cost driven aluminum prices will now moderately rebound

In 2013, the Chinese economy will continue its short-term rebound momentum, but it is difficult to return to the growth rate of over 9% in the first half of 2008. Aluminum consumption will slowly rebound, especially the boost from infrastructure to aluminum consumption. However, capacity expansion is becoming increasingly prominent. At the same time, due to the high external dependence of bauxite, the price of imported bauxite continues to rise, which brings additional pressure to the electrolytic aluminum industry in addition to electricity costs. In terms of price, due to rising costs, there has been a cost driven rebound in prices. However, due to overcapacity, there is limited space above the price, and the expected operating range is between 15500 and 16200 yuan.

Firstly, China's bauxite industry has a high degree of external dependence. With the rapid development of China's aluminum industry, the shortage of domestic bauxite resources is becoming increasingly large. However, the relatively high cost and low grade of domestic bauxite mining make it difficult to expand the production capacity of domestic bauxite mining and beneficiation, which requires importing a large amount of bauxite from overseas. Data shows that as early as November 2011, the gross profit margin of aluminum mining and beneficiation decreased to -2.15%, while in August 2011, the gross profit margin was as high as 22.07%. Statistics have found that a price of around 2800 yuan/ton of alumina in 2011 cannot guarantee a positive gross profit margin for bauxite mining and beneficiation. After Indonesia raised export tariffs on bauxite, domestic import prices also increased simultaneously, further increasing the import costs for domestic alumina enterprises. In October, the average price of bauxite imported from Indonesia by China was 52.36 US dollars per ton, a year-on-year increase of 19.86%. The cost of producing alumina using imported bauxite increased to around 120 yuan per ton.

Secondly, although the industry has experienced losses, the pace of capacity expansion has not stopped. From the perspective of industrial westward expansion, the energy and electricity prices in the central and eastern regions are constantly rising, and electrolytic aluminum enterprises are moving westward one after another. As of the end of 2011, the planned production capacity under construction in Xinjiang alone reached 13.05 million tons; On the other hand, due to the imperfect exit mechanism of industries in the central and eastern provinces, the electrolytic aluminum production capacity in the central and eastern regions has not decreased, resulting in the electrolytic aluminum production capacity "advancing westward but not retreating eastward". According to relevant data calculations, the electrolytic aluminum production capacity will reach 28 million tons in 2012 and is expected to exceed the 30 million ton mark in 2013.

Finally, due to the slowdown in the elimination of outdated production capacity due to the impulse of "stable growth" in various regions, in the first batch of non ferrous metal industry elimination of outdated production capacity list in 2012, only 9 enterprises and 271600 tons of production capacity were involved in electrolytic aluminum, many of which were electrolytic cells that had already been shut down in 2011; The second batch of non ferrous metal elimination projects in 2012 did not involve the backward production capacity of electrolytic aluminum. From a consumption perspective, the cumulative apparent consumption of electrolytic aluminum in China from January to October reached 16.6676 million tons, a year-on-year growth rate of 12.98%. However, after deducting the domestic aluminum inventory of up to 1.4 million tons, the actual consumption was only 14.2676 million tons, an increase of about 7.2% compared to the same period last year. Adding another seasonal off-season in December, the annual consumption in 2012 was only 15.7 million tons, and the growth rate may drop to 7%. It is expected that due to a mild rebound in demand in 2013, the consumption growth rate will not exceed 8%.