In the first half of this year, the price of electrolytic aluminum fell.

According to data from Zhuochuang Information, from January to June 2023, the average domestic electrolytic aluminum price was 18386 yuan/ton, a decrease of 2906 yuan/ton or 13.59 percent from the same period last year. As of June 30, the domestic electrolytic aluminum price was 18530 yuan to 18570 yuan/ton, and the average price was 18550 yuan/ton, a decrease of 120 yuan/ton or 0.64 percent from the end of last year.

"The decline in the price of electrolytic aluminum products is mainly due to the sluggish market conditions and the industry demand is less than expected." A person from the securities department of a listed aluminum company said in an interview with a reporter from China Business News.

Zheng Chunlei, an analyst at Zhuochuang Information, told reporters that in the first half of this year, the demand for electrolytic aluminum market was weak, and the most intuitive performance was the weak operation of the terminal and processing market. From the terminal market, the weak market demand situation is still obvious.

weak market demand

The decline in electrolytic aluminum prices has also dragged down industry profits.

On July 13, Shenfire shares (000933.SZ) issued a performance forecast. The company expects to achieve a net profit of 2.7 billion billion yuan in the first half of the year, a year-on-year decrease of 40.48 percent and a month-on-month decrease of 25.38 percent.

Shenhuo shares said that the main reason was that the profitability of the company's main products decreased significantly during the reporting period due to the sharp drop in the prices of coal and electrolytic aluminum products and the production restriction of the company's subsidiary Yunnan Shenhuo Aluminum Co., Ltd.

"In the first half of 2023, the low point of the price of electrolytic aluminum was in early January, and the price reached 17700 yuan/ton. At the beginning of this year, the market situation at the end of last year was continued, and the market demand continued to weaken, dragging down the price to the low level of the year." Zheng Chunlei analyzed that before the Spring Festival, market demand is expected to improve, pushing aluminum prices continuously higher from low levels. However, after the Spring Festival, the market demand performance did not meet expectations, aluminum prices fell from high.

Zheng Chunlei said that from late March to late April, due to the continuous de stocking in China, the slow resumption of production, the tightening of supply, and the improvement of various data in the first quarter, the market confidence has recovered to a certain extent, and the aluminum price has experienced a wave of rise again, closing at 19100 yuan/ton on April 20, creating the high point of aluminum price in the year. However, due to the continued weakness of domestic market demand, aluminum prices fell from high levels and created the second lowest point of aluminum prices during the year in May.

"The sharp drop in the price of electrolytic aluminum products is mainly due to the sluggish market conditions and the industry demand is lower than expected." The above-mentioned securities department said.

Zheng Chunlei also said that in the first half of the year, electrolytic aluminum price shock operation, and demand continued to be weak, supply continued to tighten, cost weak support and macro disturbance has a direct relationship, demand recovery is weak, aluminum price upward support is insufficient.

In Zheng Chunlei's view, the electrolytic aluminum market demand is weak, and the most intuitive performance comes from the weak operation of the terminal and processing market. From the terminal market, the weak market demand situation is still obvious. In the first half of the year, the real estate market data continued to show a year-on-year decline. The real estate market is the terminal market with the largest demand for electrolytic aluminum. The weak situation of the real estate market will also drag down the demand of many markets such as home appliances and building materials, resulting in a large gap in the demand for electrolytic aluminum. This is also an important reason for the continued weakness of aluminum market demand in the first half of the year.

In addition, aluminum exports also appear not small reduction. The General Administration of Customs data show that from January to May, domestic aluminum exports decreased by more than 30% year-on-year.

Zheng Chunlei believes that the decline in domestic and external demand has led to weak demand in the electrolytic aluminum market, resulting in insufficient upward momentum for aluminum prices.

Is the industry recovering?

In recent years, aluminum has been widely used in emerging industries, such as lightweight automobiles and structural upgrading of new energy vehicles, photovoltaics, wind power stations, 5G base stations, UHV, rail transit, etc., and has received increasing attention from the market.

"Due to poor consumption in the terminal market, there is downward pressure on the operation of the domestic economy, and the central and local governments continue to introduce policies to boost consumer confidence." Zheng Chunlei said that for the real estate market, bank interest rates have been continuously lowered, and various support policies for building guarantees have been introduced in various places; for the automobile market, policies such as the extension of new energy vehicle purchase tax subsidies, and new energy vehicles going to the countryside have been continuously proposed, while local governments have introduced subsidy policies. Car companies are also constantly introducing promotion policies, and car production increased by more than 10% from January to May compared with the same period last year. In other aspects, increase basic investment and continue to vigorously develop green power such as scenery. From January to May, wind power increased by 18.4 year-on-year, and solar power increased by 5.7 year-on-year. In the second half of the year, there will still be a large demand release. In addition, the construction of large-scale water conservancy facilities, Rail transit construction, etc. will boost consumer confidence to a certain extent.

Changjiang securities Research Report shows that by 2025, the global sales volume of new energy vehicles will exceed 22 million, and more than 3.6 million tons of aluminum will be needed in this field, with an average annual compound growth rate of 50% compared with 2021. The demand for photovoltaic modules will exceed 500GW, and the demand for aluminum for photovoltaic frames and brackets will exceed 10 million tons, with an average annual compound growth rate of over 30%.

The market generally predicts that with the gradual acceleration of the global energy revolution and energy structure transformation, the construction and development of new energy projects is in a stage of rapid development, and the demand for aluminum will continue to maintain rapid growth. The supply of aluminum is affected by upstream energy and resources, policy control restrictions, the situation of limited supply is difficult to fundamentally improve in the short term, the aluminum market supply and demand presents a tight balance pattern, and even a certain period of time or local supply tension.

In the field of downstream aluminum deep processing, benefiting from the rapid development of the new energy industry, the demand for aluminum products in some sub-sectors is growing rapidly, and battery aluminum foil is one of the representatives.

Tianshan Aluminum (002532.SZ) said that battery aluminum foil is mainly used as a positive current collector material for lithium batteries, which mainly plays the role of collecting current, can significantly reduce the contact resistance between positive/negative materials and current collectors, improve the adhesion between the two, and then improve the overall performance of lithium batteries, which is one of the indispensable raw materials in lithium batteries. Therefore, the continued rapid growth of the electric vehicle industry, electrochemical energy storage and lithium battery demand will also drive the continued rapid release of battery aluminum foil demand.

According to statistics from changjiang securities Research Report, according to the estimation of the demand for aluminum foil corresponding to a single GWh lithium battery of about 350~500 tons, it is estimated that by 2025, the global demand for 2000GWh lithium batteries will correspond to the demand for aluminum foil for batteries of about 700000~1 million tons, with a market space of tens of billions of yuan. At the same time, with the development of battery technology, sodium ion batteries will further increase the demand for aluminum foil.

Shenfire shares also said that at present, with the domestic economic recovery, traditional industries such as infrastructure and real estate have rebounded, and the amount of aluminum used in emerging industries such as photovoltaics, automotive lightweight, and new energy vehicles has increased significantly, and aluminum demand will Continue to pick up; and affected by the situation in Ukraine, the recovery of overseas production capacity is slow, and new production capacity is limited. In 2023, the domestic electrolytic aluminum supply and demand market is likely to maintain a tight balance, and prices are expected to remain relatively high.

However, Zheng Chunlei believes that the real estate market as a whole is in a downward cycle, and real estate enterprises are actively deleveraging. In 2022, the area of newly purchased land by real estate enterprises once fell by more than 50%, and the actual demand still showed a downward trend. The automobile market is mainly consumption upgrading, and new energy vehicles replace oil vehicles. The overall increment is difficult to make up for the reduction in demand in the real estate market. In addition, the international environment is still complex and changeable, and international demand may continue to remain weak. The export of aluminum products such as aluminum products is expected to decrease in the second half of the year. In the short term, the possibility of major changes in domestic and foreign demand is low. Therefore, under the background that domestic demand is recovering and international demand is difficult to change, the room for aluminum price increase may be limited.