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    The aluminum price continues to rise. How long will the mud storage safety problem be fermented?

    2019-05-15 09:57:12

    Hedge research

    1. Main events:

    The red mud reservoir problem of the red mud reservoir leakage incident in Shanxi Jiaokou and Xiaoyi was exposed. The local government set up a survey working group to carry out verification and rectification. At present, three alumina enterprises have been affected by the incident, involving a production capacity of about 3 million tons.

    2. Direct impact:

    Alumina continued to be surplus in the first quarter of 2019, and losses occurred in high-cost areas, and centralized maintenance activities have taken place. Affected by the safety incident of the red mud warehouse, the capacity of 3 million tons will be shut down again, and the monthly output will be reduced by 250,000 tons. This will make domestic alumina no longer surplus and drive the price of short-term alumina to rise.

    3. Market introduction:

    The event pushed alumina prices up – industry profits improved – capacity was accelerated. The capacity of the newly-added production is not enough to cover the shutdown capacity, but the maintenance capacity of the maintenance will accelerate. In addition, the price of alumina inside and outside is faltering, and the later import window faces to open again, becoming an obstacle to the upward movement of alumina. Therefore, in the case where the situation does not expand, the resistance above the alumina is expected to be 3,000 yuan / ton.

    risk warning:

    Red mud warehouse safety inspection spread out widely

    0 1 Red mud library security issues are focused by the media

    On May 7th, the Beijing News published "The red mud on the head and the sewage on the foot. The taxpayers have the "pollution privilege"", which tells the origin and characteristics of the red mud reservoir, and describes the living conditions of the residents of the red mud reservoir in Shanxi Jiaokou. It is pointed out that the relocation of residents is not the key to solving the problem, but it is necessary to supervise according to law, face up to and control the pollution of the aluminum plant, and fundamentally remove the potential risk of the “suspension” red mud bank.

    0 2 event follow up

    The security problem of the red mud bank was focused by the media and attracted attention from all walks of life. Relevant enterprises faced production suspension and rectification. In addition, the safe inspection of the red mud warehouse was carried out in Shanxi Province. On May 10, the market sent a notice to the People's Government of Jiaokou County on stopping all production activities of Shandong Dongyue Energy Interchange Feimei Aluminum Co., Ltd., signed on May 9, 2019. As of May 13, based on the information of all parties, three alumina enterprises in Shanxi Province have been affected by the red mud reservoir incident. The situation of production suspension is as follows:

     Special report | Aluminum prices continue to rise, how long will the red mud warehouse safety problem be fermented?

    0 3 direct impact

    The red mud reservoir problem of the red mud reservoir filtrate leakage incident in Shanxi Jiaokou and Xiaoyi was exposed, and the local government attached great importance. An investigation team has been set up to carry out verification and rectification. At present, 1.75 million tons of production capacity has been shut down, followed by a high probability of 1.3 million tons.

     Special report | Aluminum prices continue to rise, how long will the red mud warehouse safety problem be fermented?

    According to Aladdin's data, in March 2019, the actual operating capacity of alumina in China was 69.61 million tons, the completed production capacity was 83.97 million tons, and the operating rate fell to 829,000 tons. The decline in operating rates was mainly due to the drop in alumina prices, which triggered alumina companies to repair and reduce production.

    Using (alumina production + import volume - export volume) - electrolytic aluminum production * 1.92 to characterize the equilibrium state of alumina, it is found that since October 2018, domestic alumina has gradually turned into excess state, and the price of alumina is also from 3,250 yuan / The tonnage weakened all the way, and fell to 2,725 yuan / ton at the end of March. The alumina operating rate in March dropped significantly. In April, the price of alumina fell to 2,650 yuan / ton, the scope of maintenance of northern alumina enterprises increased, and the actual operating capacity continued to decline.

    If the monthly loss of 2 million tons is estimated by shutting down 3 million tons/capacity, it is estimated that the domestic alumina market will no longer be surplus in May. Therefore, the manufacturers to the traders are all excited.

    0 4 market outlook

    At present, will the situation not be further clarified by the fermenter, that is, will the scope of the investigation continue to expand? How long does it take for the capacity to be shut down to recover?

    In the case where the scope of the investigation is not expanding, the evolution path is that supply and demand are turned into surplus - price increases - improving industry profits - to promote the return of new capacity and maintenance capacity. The increase in new delivery may not cover the number of shutdowns, mainly depending on the return of maintenance capacity.

     Special report | Aluminum prices continue to rise, how long will the red mud warehouse safety problem be fermented?

    In addition, the domestic alumina price rise and the overseas alumina price fell, forming a price split, and the overseas alumina import window is facing reopening. Therefore, in the case where the situation does not expand, it is estimated that the resistance in front of alumina is 3,000 yuan / ton.

     Special report | Aluminum prices continue to rise, how long will the red mud warehouse safety problem be fermented?

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