Aluminum companies cut production
Affected by the conflict between Russia and Ukraine, the production capacity of electrolytic aluminum in Europe has continued to decline this year. This week, with the suspension of the “North Stream No. 1” gas pipeline in Russia, the price of electricity in Europe has risen sharply. The production reduction will be intensified. Affected by this, the stock prices of domestic electrolytic aluminum listed companies have risen sharply.
A reporter from the Financial Associated Press learned from industry insiders that the current reduction in European electrolytic aluminum production capacity has exceeded 1 million tons, and it is expected that there will be further reductions before winter. However, due to the small overall production capacity of electrolytic aluminum in Europe, its production reduction has little impact on the supply, demand, and price of the electrolytic aluminum market.
The production reduction and electricity price will have a band-like positive for aluminum prices, but it is not expected to form a long-term trend. A person from a related listed company also told reporters: “At present, the company’s ex-factory aluminum price has not changed significantly.”
The scale of the shutdown of European electrolytic aluminum enterprises continues to expand
Since a considerable part of Europe’s electricity supply comes from natural gas power generation, Russia’s shutdown of gas supply has had a huge impact on Europe’s electricity supply.
Wang Yanchen, general manager of the British branch of Shanghai Nonferrous Metals Network, told the Financial Associated Press that the French Dunkirk Aluminum Company had already cut production by 15%. High.
In addition, Alcoa’s aluminum smelter in Norway will cut output by a third, and Norway’s Hydro also said it plans to close its aluminum smelter in Slovakia at the end of September.
Wang Yanchen told the Financial Associated Press: “Today, the electricity price in the French spot market is 626 euros/MWh during the high period, which is nearly three times higher than the high-hour electricity price of 257 euros/MWh on February 1. All Europe The production capacity of electrolytic aluminum is about 4.8 million tons, and the production capacity that has been shut down has exceeded 1 million tons, and it is expected that there will be further reductions before winter.”
Wang Yanchen believes that European aluminum companies may further reduce production before winter. On the one hand, the price of electricity is too high. Since most aluminum factories in Europe are mainly based on long-term electricity contracts, some contracts can sell electricity back to power grid companies. The current electricity price is higher than the purchase price, and the profit of aluminum enterprises from selling electricity may be higher than the profit of producing electrolytic aluminum, and some enterprises may stop production and sell electricity.
At present, the power supply of Iceland and Norway in Europe is less affected. In addition, most electrolytic aluminum companies in other countries have reduced production.
European electricity prices skyrocketed, and aluminum companies cut production significantly Analysts: There may be further production cuts before winter
Wu Shu of Soochow Futures told the Financial Associated Press that it is optimistic that the increase in output reduction in the second half of the year can be controlled within 100,000 tons, and if it is pessimistic, it may reduce production by 500,000 tons. “At present, the development of the situation can be said to be closer to pessimistic expectations.”
In addition, Wang Yanchen worries: “Due to high inflation in Europe and the United States, aluminum plants may further reduce production due to labor-management negotiations. This risk is not only in European countries but also in other regions such as the United States and South Africa.”
European production cuts have limited impact on the market
Wu Shu believes: “The amount of production cuts in Slovakia, Norway, and France is expected, and the news of production cuts has little impact on the disk.”
Wang Yanchen told the Financial Associated Press: “Currently, the production capacity of electrolytic aluminum is decreasing, but because European demand is also weakening, it has little impact on the supply and demand structure, and the LME aluminum price is still relatively stable.”
At the same time as the supply is reduced, the demand for aluminum in Europe is also declining. A few days ago, SPEIRA, a large aluminum rolling company, said that its German plant will reduce production by 50%. “Take the German auto industry as an example. Due to the shortage of chips and some parts, the production of automobiles has declined, and the demand for aluminum has also declined significantly.” Wang Yanchen said.
In addition, export data shows that my country exported 652,000 tons of unwrought aluminum and aluminum products in July, and 540,000 tons in August, a sharp decline, or a downward trend in overseas demand.
Wang Yanchen also said that because some European aluminum smelting capacity is difficult to restore once it is closed, with the recovery of the economy in the future, the European manufacturing industry may rely more and more on imports of aluminum.
Recently, the domestic market price has also been relatively stable, and the aluminum price has not been affected by the production reduction in Europe. A company official from Nanshan Aluminum (600219. SH) told the Financial Associated Press: “At present, the company’s ex-factory aluminum price has not changed significantly.”
Wu Shu said: “It is difficult to see good news on the fundamentals of electrolytic aluminum. Although the inventory is low, the consumption is not good. It has not reached the peak season level, and it is difficult for prices to rise.”
Since the domestic electrolytic aluminum production capacity exceeds 40 million tons, the changes in aluminum prices are still dominated by the domestic supply and demand structure. Therefore, the current events that have a greater impact on electrolytic aluminum prices are the impact of the Fed’s interest rate hike expectations on bulk commodities and the domestic production cuts in Sichuan and Chongqing.
Wu Shu said: “Although the production reduction in Sichuan and Chongqing and the lack of hydropower in Yunnan have caused the market to worry about the supply side, the domestic new production and resumption of production capacity are relatively large, and the domestic production capacity is still at a high level in previous years in terms of total production. The production reduction and high electricity prices in Europe There will be a wave of good for aluminum prices, but it will not be able to form a long-term trend.”
Due to the demand for heating in Europe in the second half of the year, energy prices may remain high. The basic load electricity prices delivered by France and Germany next year have exceeded 1,000 euros/MWh. But Wang Yanchen expects: “Because the high electricity price has caused people’s demonstrations in some countries, which has affected social stability, the government will intervene in the electricity market, and should not allow electricity prices to rise to the level of 1,000 euros.”