Since this year, Shanghai Aluminum Futures has maintained a unilateral decline. Since Wednesday, the decline has accelerated. The latest main 1805 contract closed at 13860 yuan/ton, down 1.88%. Analysts said that the collapse of the cost of electrolytic aluminium and the oversupply of the industrial chain have put pressure on the trend of Shanghai aluminium futures. In the short run, Shanghai aluminium may maintain a weak operation. However, in the medium term, considering that the backward production capacity of aluminium will continue to be degraded in the future, and with the arrival of the peak consumption season, the contradiction between supply and demand is expected to be transformed, and the price of aluminium is expected to rebound.
The contradiction between supply and demand is prominent
Since Wednesday, Shanghai Aluminum Futures has accelerated its decline. Yesterday, the main 1805 contract fell to 13820 yuan/ton, a new 10-month low, closing at 13860 yuan/ton, down 265 yuan or 1.88%.
"The collapse of the cost of electrolytic aluminium and the oversupply of the industrial chain are the main focus of short positions in Shanghai aluminium futures market." Li Suheng, a researcher at Huatai Futures Metals Group, said that it is estimated that there is only a slight excess of alumina at present, but after the heating season, alumina and anode enterprises will gradually resume production, and the supply pressure will intensify in the future. Therefore, alumina and anode prices are expected to remain declining, and the cost center of electrolytic aluminium will fall again. In addition, in March, downstream construction or gradual recovery, the current consumer side has not improved significantly, electrolytic aluminium is still in the storage stage, aluminium prices are still under downward pressure.
As for electrolytic aluminium, domestic aluminium prices fluctuated downward last week, with different mainstream market demands and stable transactions. On the stock side, on March 12, according to the data of "My Nonferrous Net", the total social stock of aluminium ingots was 2.236 million tons, an increase of 47,000 tons over last Thursday.
Zhang Huawei, an analyst at Dongwu Futures Co., Ltd., said that last year the market looked forward to supply-side reforms to reduce production capacity and predicted a shortage of aluminium supply after the implementation of heating restrictions in winter. But in fact, since the second half of last year, the main consumption of social inventory has been growing, and has now exceeded 2 million tons. According to the registered warehouses in the previous period, the inventory level has also kept a record. At present, it is about 850,000 tons, which is nearly 580,000 tons higher than the same period last year. At the same time, due to the overall recovery of industrial consumption after the Spring Festival is not as expected, the black sector has fallen sharply, and the overall market is also in a short atmosphere. "In the short term, the winter production season is coming to an end, and some production capacity will resume operation as planned, while near delivery, the contradiction between supply and demand highlights the promotion of short-term warehousing to suppress aluminum prices during the period."
Short-term vulnerability will continue
"At present, the aluminium price has fallen below the industry's full average cost, some backward production capacity will continue to shut down, and some enterprises are delaying the operation of new production capacity. In the short term, Shanghai aluminium futures price may continue to fall due to high inventory and market sentiment, but with the arrival of the peak consumption season, the contradiction between supply and demand will be transformed, and the aluminium price will rebound." Zhang Huawei said.
This can be verified by the current policy and the outlook of the basic situation of the aluminum market. Zhang Huawei said:
Firstly, it can be seen from the government work report that the backward capacity of aluminium will continue to be degraded in the future, the overall capacity will be effectively controlled, and the demand for aluminium will continue to develop rapidly with economic growth. Over time, the contradiction between supply and demand will be transformed.

Secondly, in order to achieve a significant reduction in total pollutant emissions, the production process of raw materials and accessories for electrolytic aluminium will require more investment in machinery, equipment and technology. At the same time, new production capacity needs to obtain "productivity indicators" before putting into operation. The barriers to entry of the industry will be more solid, the concentration degree will be effectively enhanced, and the disordered competition in the industry chain will be effectively curbed. The structure will also be more reasonable.

Thirdly, the overall consumption demand of aluminium in China is still in a relatively rapid growth stage. Last year, when aluminium prices were high, some demand was restrained, and some orders were delayed. After aluminium prices fell back to a reasonable level, this part of demand will recover, which will limit the downward space of aluminium prices.

Li Suheng also believes that at present, if raw material prices continue to fall, cost support may weaken. In addition, high inventories, the end of the winter production limit, the price of aluminium again suppressed. In the short run, the price of aluminium may maintain a weak operation in the case of high supply pressure. However, from the perspective of supply and demand logic and policy expectations, the capacity of electrolytic aluminium is still excessive, and the new production is still continuing, the pressure of de-inventory is high, and the implementation of domestic de-production policy is expected to be strengthened in the future.

From China Securities Daily