Aluminum prices stopped falling and rebounded in December

On December 31, the average price of domestic aluminum ingots in the East China market was 20,370 yuan/ton, which was an increase of 7.78% from the average market price of 18,900 yuan/ton at the beginning of the month (December 1).

The current aluminum price has fallen below the previous high and volatile operating range. At this year's peak (October 19, 2021) aluminum ingot market average price of 124,240 yuan / ton, the recent cumulative decline of 15.97%. Taking the average market price of aluminum ingots at the beginning of the year (January 1, 2021) at RMB 15,726.67/ton as the benchmark price, a cumulative increase of 29.53%.

Reasons for rising prices

The domestic aluminum price in December was obviously driven by the external market, especially due to the continued fermentation of the European energy crisis. The news of the reduction of production in many European aluminum plants was reported. Although the short-term increase in the US's European LNG imports has partially alleviated the market's concerns about European supply.

European energy issues have tightened the supply of aluminum in Europe. European aluminum companies have begun to gradually develop a shutdown plan. According to estimates, the current shutdown scale is expected to be 500,000 to 600,000 tons, and the potential reduction in production is as high as 2 million tons. The question of whether the tightening of supply will lead to a further expansion of the scale of the shutdown of European aluminum companies. According to IAI data, the total production capacity of electrolytic aluminum in Europe accounts for 11% of the total global production capacity, with the exception of China accounting for 26% of overseas aluminum smelting capacity. According to CRU data, in Q4 2021, the electricity source for nearly 2.4 million tons of aluminum smelters in Europe is natural gas.

Domestically, the market expects improvement in domestic real estate demand. According to the data of aluminum ingot destocking, recent consumption is good. Although cost support has weakened, aluminum ingot prices are still expected to continue to destock and weak overseas supply. The possibility of continuing to move higher. Recently, attention has been paid to the Spring Festival approaching, the downstream operating rate is lowering, and the terminal consumption decreases, the market's tolerance for seasonal accumulation.

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