Cable Raw Materials (Aluminum) Monthly Report for May 2023

1、 Fundamentals

1. Recently, Yunnan Aluminum Corporation held a special meeting on promoting 15 key special tasks and 5 key issues through wall chart operations, summarizing and analyzing the progress of special tasks and key issues from January to April, and arranging and deploying the next steps of work.

2. According to data from the National Bureau of Statistics, from January to April 2023, the non-ferrous metal smelting and rolling processing industry achieved a revenue of 2359.98 billion yuan, a year-on-year increase of 0.6%; The operating cost was 2245100 million yuan, a year-on-year increase of 3.9%; The total profit was 49.3 billion yuan, a year-on-year decrease of 55.1%.

3. According to data from the National Bureau of Statistics, the production of electrolytic aluminum in April was 3.33 million tons, a year-on-year increase of 0.8%; The production of electrolytic aluminum from January to April was 13.32 million tons, a cumulative year-on-year increase of 3.9%. There were still reports of production cuts in Yunnan region during the month, but they have not been implemented yet. The actual production capacity has not been affected yet, and the resumption of production in Sichuan, Guangxi and other places is relatively slow. The month on month change in electrolytic aluminum production in April is not significant compared to March. It is expected that the resumption of domestic electrolytic aluminum production in May will mainly come from Guizhou and Sichuan, and the new projects will mainly be put into operation in Sichuan, Inner Mongolia, and other places.

4. According to data from the National Bureau of Statistics, the production of alumina in April was 6.95 million tons, a year-on-year decrease of 0.6%; The cumulative production from January to April was 26.516 million tons, a year-on-year increase of 4.0%. Among them, the alumina production in Shandong and Guangxi from January to April was 9.623 million tons and 4.5248 million tons, respectively, a year-on-year increase of 11.44% and 16.41%. The alumina production in Shanxi was 6.1217 million tons, a year-on-year decrease of 8.33%.

5. According to data from the National Bureau of Statistics, the aluminum production in April was 5.41 million tons, a year-on-year increase of 7.0%; Shandong's production ranked first at 1.1231 million tons, a year-on-year increase of 4.08%, followed by Henan region, with a production of 914400 tons in April; The cumulative production from January to April was 19.399 million tons, a year-on-year increase of 3.7%. Among them, the aluminum production in Shandong and Guangdong increased by 1.06% and 0.54% year-on-year from January to April, while the aluminum production in Shanxi decreased by 2.35% year-on-year.

6. It is understood that the operating situation of aluminum material enterprises in April remained stable compared to March, but the trend of weak order output, especially the drag on building profiles, was more obvious. After entering May, the decline in enterprise orders was significant, and the market had a strong pessimistic atmosphere. Under the influence of the short-term off-season, it is expected that the operating rate may decline.

2、 Market Review

In May, the overall trend of Shanghai Aluminum was also weak, with a correction in volatility. The overall range was between 17455 and 18500, with a cumulative decline of 2.46% this month, which is relatively small compared to the external market.

At the beginning of May, due to the Labor Day holiday, Shanghai Aluminum was closed. On May 4, it returned to normal. The results of the Federal Reserve's interest rate increase came to fruition, and the main force of Shanghai Aluminum showed a narrow and volatile trend as a whole. But then the stock of the Bank of America fell sharply, making investors again worried about the crisis of the Bank of America. The U.S. debt crisis also followed. Under the news of continuous negative interest, Shanghai Aluminum also fell continuously, and once fell below 18000, and as the U.S. debt crisis continued to ferment, In May, the PMI of China's manufacturing industry decreased by 0.4 percentage points compared to the previous month, indicating that the demand in the manufacturing market is still insufficient and the release of enterprise production capacity is constrained. The pessimistic sentiment in the market spread, and on the 25th, the main force of Shanghai Aluminum fell to a new low of 17455 for the year. Subsequently, the market rebounded from an oversold decline, and progress was also made in the negotiations on the US debt ceiling. The market's emotional recovery was obvious, and Shanghai Aluminum stopped falling and rebounded. At the end of the month, it returned to above 18000. It is expected that the overall focus of June will shift upwards compared to May, or fluctuate around 176-1900.

The macro news in May was bearish, with weak aluminum prices and a renewed downward trend in orders from recycled aluminum companies. Most alloy ingot companies experienced some degree of capacity reduction, mainly due to the continued weakness of downstream demand. In addition, high production costs and weak spot market performance also had a significant negative impact on the production enthusiasm of enterprises, with overall market transactions lower than in April. The southwest region is also about to enter a flood season, and there are recent signals from Yunnan that production capacity is about to resume. Enterprises such as Yunnan Aluminum have made sufficient preparations, and the supply gap of electrolytic aluminum will be filled. There are also certain restrictions on aluminum prices, and it is expected that aluminum prices will fluctuate around 1.7819 million in June.

3、 Inventory aspect

As of the end of May, LME aluminum inventory reached 579525 tons, an increase of 11025 tons or 1.94% compared to the beginning of the month. The total inventory remains at a high level in early February of this year. The aluminum inventory of Shanghai Futures Exchange has continued to decline since mid March this year. As of May 26, the total inventory of Shanghai Futures Aluminum reached 154815 tons, a decrease of 80994 tons or 34.35% compared to the beginning of the month. The total inventory is close to the low level at the beginning of January this year. Since the beginning of March this year, the social aluminum ingot inventory in 8 regions in China has continued to decline. As of the end of May, the social inventory of electrolytic aluminum ingots in China has dropped below 600000 tons, about 595000 tons, a decrease of 290000 tons or 32.77% compared to the beginning of the month; Compared to the high inventory of 1.269 million tons in March, it decreased by 674000 tons, a decrease of 53.11%.

4、 Waste market

In May, the price of scrap aluminum steadily decreased. According to data from Fubao Nonferrous Metals, as of May 31, 2023, the price of aluminum alloy used white materials in mainstream regions in China was 15000-15200 yuan/ton, and the price of bright aluminum wire was 16100-16400 yuan/ton. The price of aluminum alloy materials and aluminum wire generally decreased by around 200 yuan/ton; The mainstream price of Drink can market is 12800-13000 yuan/ton, and the mainstream price of clean machine aluminum is between 13900-14200 yuan/ton. The fluctuation at the end of April is small, and basically remains stable.

In May, there were also differences in the variety of scrap aluminum, with aluminum alloy ingot raw materials showing resistance to decline, while aluminum wire, profile materials, and others showed a decline of around 200; The main reason for the decline in the production of aluminum waste aluminum this time is due to the tight supply of goods in the market and the stable price of aluminum alloy ingots. It is understood that although there was a shortage of orders from recycled aluminum alloy ingot enterprises in May, due to cost reasons, prices have shown resistance to decline, and aluminum factories maintain an on-demand procurement model for scrap aluminum; In terms of profit, it is understood that the cost in East China has increased due to power, and the profit of enterprises has been compressed again.

5、 Market outlook

In May, the macro sentiment was empty, the US Debt limit problem combined with poor domestic economic data, and the aluminum price was weak and volatile; With the temporary resolution of the US debt ceiling crisis at the end of the month, aluminum prices have seen an opportunity to rebound. However, the shadow of economic recession is hard to remove, and there has not been a significant improvement in fundamentals. The traditional consumption off-season is approaching. Although the signs of seasonal off-season transition are not obvious this year, the proportion of aluminum water is rising, coupled with increased production of aluminum rods and significant pressure on inventory accumulation. Currently, demand is difficult to be optimistic based on downstream orders and operating performance. In addition, as the Southwest officially enters the wet season, the cost side of pre baked anodes and electricity prices continue to decline, and there is still a possibility of the center of gravity of aluminum prices moving downwards. On a macro level, be vigilant against unexpected disturbances and overseas liquidity issues, while on a fundamental level, pay attention to the performance of Southwest Hydropower and its subsequent actual consumption fulfillment.