Aluminum prices fluctuated sideways in May
According to the Commodity Market Analysis System of Business Society, the average price of domestic aluminum ingots in the East China market on May 30, 2023 was 18363.33 yuan/ton, a decrease of 0.69% compared to the aluminum price of 18490 yuan/ton at the beginning of the month (May 1).
In the long term, the current price is in the sideways range after a high price decline, and has been fluctuating in the range of 17500 to 19500 yuan/ton.
Macro factors
In May, the Federal Reserve raised interest rates by 25BP, pushing them up to 5-5.25%, a new high in recent years; A preliminary agreement was reached on the 27th of the US debt ceiling negotiation. Although the FOMC of the Federal Reserve said that the interest rate increase was gradually coming to an end, it still needed time to verify and observe whether the Federal Reserve started to cut interest rates.
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2. In May, the Markit manufacturing PMI index in the United States recorded 48.5, a decrease compared to April. In April, the core CPI in the United States increased by 5.5% year-on-year, while the PCE price index increased by 4.7% year-on-year, higher than expected and previous 4.6%; The eurozone manufacturing index PMI further declined to 44.6, and the core CPI of the eurozone increased by 5.6% year-on-year in April. Economic data from Europe and the United States performed poorly, with inflation improving less than expected.
On the domestic side, the year-on-year growth rate of domestic CPI in April was the lowest level since February 2021, and PPI data fell simultaneously. The RMB exchange rate broke the 7 integer mark in May. After the May Day holiday, the growth rate of industrial product consumption and production continued to slow down.
Fundamental factors
On the demand side, terminal consumption is weak, and real estate investment and new construction data are poor. In May, consumption gradually became flat, while in April, the operating rate of aluminum companies slightly declined. The operating rate of aluminum companies continued to decline on a weekly basis, with weaker orders for building profiles and photovoltaics. The operating rate of alloys, cables, and aluminum foil remained stable, but new orders for enterprises declined.
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On the supply side, in May 2023, the production of electrolytic aluminum was approximately 3.43 million tons (estimated), and the daily chemical production was approximately 110600 tons, with an average daily production continuing to increase. In April, China’s primary aluminum production was 3.3149 million tons, with an average daily production of 110500 tons; Compared to March 2023, the daily production increased by 109400 tons. At present, the electrolytic aluminum industry has built a production capacity of 47.649 million tons, with an operating capacity of 40.397 million tons and an operating rate of 84.78%. Recently, we have been paying attention to the electricity situation and stability performance in Yunnan during the high water period in June, and the pace of resuming production in Yunnan is approaching.
Inventory data: Domestic inventory has significantly declined; Data shows that as of May 29th, the mainstream market of domestic electrolytic aluminum ingots had a social inventory of 573000 tons, which was 798000 tons compared to April 27th, and 225000 tons were removed from stock.
Future market forecast
From the supply side perspective, production slightly increased in May, and inventory data shows a clear trend of inventory depletion in the electrolytic aluminum industry. The main game point currently lies in the actual supply and demand changes in the later stage. It is expected that aluminum prices will mainly fluctuate around 18500 yuan/ton in the short term, and we will be watching downstream consumption intensity in the near future.
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