To welcome the peak season for aluminum prices is expected to maintain upward oscillation

In March, aluminum prices performed significantly better than copper, zinc, and other basic metals, and the steady rise exceeded US$2,600/ton to record highs. In the report released by the international investment bank, aluminum has gradually become the star of commodity investment: RBS strategists ranked it as the best investment choice in 2011; Macquarie Group, Barclays Capital and Deutsche Bank have also transferred their outlook to the market. To see more.

I. Rising costs lay the foundation for aluminum prices Recently, the rise in oil prices in the Middle East, coupled with the negative impact of Japan’s earthquake and nuclear leakage crisis, has led to a substantial increase in the prices of alternative energy sources, driving up the production costs of primary aluminum. If energy prices remain high, it is expected that aluminum prices will continue to rise.

In addition, the increase in raw materials and labor costs for minerals has caused further pressure on the cost of primary aluminum. Chinalco raised the spot price of alumina to 3,000 yuan/ton on March 3, up 3.4%. In 2010, the average cost of electrolytic aluminum smelting in China was 15,963 yuan. In 2011, the cost of electrolytic aluminum was calculated based on the latest prices of raw materials, and the domestic aluminum cost was about 16,250 yuan/ton.

In terms of downstream demand, as the preferential policies for car purchases have been largely cancelled and the hot spring sale has passed, the growth momentum of sales of passenger cars in China in the coming months will be weakened. The aluminum consumption demand in the real estate sector is also basically stable. In the next five years, the country plans to build 36 million new affordable housing units, roughly double the scale of the past 10 years. At the same time, in the “Twelfth Five-Year Plan” outline, it also explicitly proposed providing low-rent housing for low-income housing families in urban areas. The increase in the construction of affordable housing in the future will offset the aluminum gap in commercial housing.

Second, the relationship between aluminum inventory and price internal and external data show that China's aluminum stocks close to 2 million tons, the highest level since August last year, LME stocks also increased to about 435 million tons. However, the current aluminum inventory does not fully reflect the changes in the market supply and demand relationship, more than 80% of the ** warehouse receipts have made the aluminum inventory unable to circulate, short-term stock increases and decreases are more market participants to adjust positions. Therefore, it cannot be directly regarded as an oversupply, which in turn will exert pressure on the price of Alluminium. On the contrary, due to the tight physical supply in the spot market, the spot premium of aluminum spot has remained strong, staying above the level of US$125/tonne. In contrast, the domestic aluminum market is more responsive to changes in spot inventory.

In summary, the increase in cost promotes aluminum prices. At present, market fundamentals have not changed much. The growth rate of real estate, automobiles, and electric power may slow down this year, but growth is still guaranteed. The demand for high-speed rail, high-end manufacturing and new economy may exceed expectations. The upcoming aluminum ETF will absorb approximately 1 million tons of inventory. Whether aluminum will exit the market similar to that of last year's copper market is still worthy of attention. Japan's post-disaster reconstruction is expected to significantly increase aluminum demand, and the arrival of the traditional consumer season will also support the spot market price. If the aluminum price is pulled back to 16,000-16,300 yuan/ton in the short term, it is more than a chance to open positions. It is expected that aluminum prices will oscillate upwards in the April-May purchase season.