European aluminum companies to stop production on aluminum prices to enhance the strength of limited Shanghai aluminum will face a correction

2023-07-31


Comprehensive Foreign News: Higher electricity costs in Europe will shut down some aluminum smelters, but the push up on LME aluminum prices is limited. Chinalco started all its production capacity, aluminum market excess pressure continues to drag down the rise of aluminum. Some aluminum smelters in Europe will be closed, affected by higher electricity costs. The European Aluminum Association recently said that with the continuous rise of electricity prices in Europe, about 66% of electrolytic aluminum enterprises in Europe will face closure. It is estimated that 2 million tons of electrolytic aluminum production capacity will be challenged by increased costs. Affected by this, LME aluminum prices rose rapidly, reaching a maximum of $2,291.0/ton. In addition to the closure of some aluminum smelters in Europe, Venezuela also said on the 22nd that it would reduce the output of the country's two major aluminum smelters, as the storage capacity of the country's reservoirs decreased and the power generation could not meet the production needs of aluminum smelters. Judging from the current situation in Venezuela and Europe, LME aluminum prices should be supported, but this is not the case. Some European aluminium smelters have built plants in Asia, thus avoiding the curtailment of aluminium production due to the high cost of electricity. For example, the Norwegian Hydro Aluminum Company recently announced that its new 585000 tons/year electrolytic aluminum project in Qatar has been completed and put into operation, and the first batch of aluminum ingots were produced on December 20. The total investment of the electrolytic aluminum plant is 5.6 billion US dollars. The U.S. auto industry economy has declined, affecting aluminum market demand. From the perspective of LME inventory, LME aluminum inventory has increased more since December 15, partly due to the result of the change of hidden inventory into explicit inventory, such as the increase of Johor inventory; the other is due to the economic decline of the US automobile industry, such as the increase of inventory in Detroit. Judging from the price performance of LME aluminum, the decline in aluminum market demand is greater than the decline in supply, which ultimately makes it difficult for aluminum prices to continue to climb higher. Chinalco started all its production capacity, dragging down Shanghai Aluminum's rise. Chinalco said on the 14th that the company has basically restored all its spare capacity of alumina and primary aluminum. The current capacity utilization rate has increased from 88-90% at the end of October. It is estimated that Chinalco's actions will lead to an increase of 960000 tons per year in the domestic aluminum market. At present, the domestic aluminum market has shown a situation of oversupply Chinalco to start all its production capacity, will lead to the domestic aluminum market excess pressure to increase, although China's auto production and sales are rising, but from the SHFE inventory point of view, there is no sign of reduction, indicating that in the supply and demand game, aluminum supply has the upper hand. At present, the value of aluminum Shanghai is below 7.30. If the ratio is to rise to near the break-even point in the short term, it seems that we can only hope that LME aluminum will fall more.



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