Reproduction of social harmony in the future, the aluminium market is expected to grow red

The growth rate of aluminium exports has fallen. Export volume grew by 1.4% in the first quarter of 2019, which has warmed up from December 2018 to 4.58% in the first quarter of 2018. However, the export growth rate of 13.73% in the first quarter of last year dropped significantly. The domestic aluminium export situation is similar to the overall export situation, but the export decline is smaller. In the first quarter of 2018, the growth rate of domestic aluminium exports was 19.7%, which fell to 13.6% in the first quarter of 2019 due to factors such as exchange rate and Hulun ratio of aluminium price.

The increment of return to production at the supply end is limited. As of April 2019, China's new production capacity of electrolytic aluminium was 745,000 tons, with a reduction of 426,000 tons, and there was no re-production capacity. As a result, domestic production capacity of electrolytic aluminium only increased by 319,000 tons. Considering that most of the new production capacity was put into operation in the second half of 2019, we expect domestic production of electrolytic aluminium to increase by 460,000 tons (corresponding to the growth rate of 1.3%) in 2019. In addition, we emphasize that the re-production capacity will be much lower than expected, hoping to attract investors'attention. First, in 2018, the total reduction of production of electrolytic aluminium is 3.03 million tons, but only 111 million tons are due to loss reduction, while the remaining 192 million tons are mostly due to index transfer and permanent shutdown, so the capacity to re-produce in 2019 is limited. Secondly, most of the loss capacity is reduced between alumina price 3000 yuan/ton and electrolytic aluminium price 13500-14500 yuan/ton. Therefore, we have reason to infer that under the current alumina price of 2700 yuan/ton, the cash cost of these loss capacity should be above the range of 12900 yuan/ton-13700 yuan/ton, while the spot price of electrolytic aluminium once reached 14 000 yuan/ton in the near future, which is still unknown. Seeing the re-production capacity, we have confirmed our point of view. Therefore, we have reason to infer that the price of electrolytic aluminium needs to rise to about 14500 yuan/ton before electrolytic aluminium enterprises have the power to re-produce.

Inventory depletion, electrolytic aluminium profit substantially repaired. After nearly two months of storage period around the Spring Festival, the domestic electrolytic aluminum inventory has reached a turning point in mid-March. Since March 18, the domestic electrolytic aluminum explicit inventory has been reduced by 119,000 tons. In addition, aluminium prices have been rising recently, while alumina prices have declined. Since the beginning of the year, the profits of electrolytic aluminium sector have increased by about 1000 yuan/ton, and the profits of the industry have been repaired rapidly. We believe that the main reason for the current loss of electrolytic aluminium industry is that high inventory depresses the profits of the industry, so inventory depletion will be the core driving force of this round of rising aluminium prices. It is estimated that the supply and demand gap of electrolytic aluminium will reach 700,000 tons in 2019, and the depletion of inventory will drive the industry to restore profits.