Last week, the National Bureau of Statistics of China announced the August aluminum production data, which caused some unease in the market. The annual rate of output conversion reached 9 million tons, which reached an incredible high level. The China Nonferrous Metals Industry Association also announced The relevant data, the data is relatively readable, the data show the conversion rate, the August output was less than 8.1 million tons, but still reached a record high level, but its implications are obviously more significant mild!
China's aluminum output rose rapidly again!
According to the China Nonferrous Metals Industry Association's data and China's import and export data, it appears that China's surface consumption growth has accelerated again in the past two months, increasing by more than 20% year-on-year in the first two months of single digit growth. .
China's aluminum surface requirements
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January-August growth rate from January to August
Thousand tons 2005 2004
Thousand tons production capacity 5,049 4,279 18.0% 770
Import 417 714 -41.7% -298
Export 950 904 5.0% 45
China Net Imports -533 -190 -343
Shanghai Futures Exchange Inventory Changes - 2 120 - -122
Surface consumption 4,518 3,969 13.8% 550
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Source: China Nonferrous Metals Industry Association, Official Trade Statistics, Macquarie Research September 2005
In the first eight months of the year, China's aluminum surface consumption has increased by 13% year-on-year, and the growth rate is moderate. Considering that the industrial production has increased by 16% year-on-year, the aluminum semi-finished product output (this is assumed to be an approximate value close to the demand). It is reported that this year has grown by 27% over the previous year.
This data shows that there will not be any inventory establishment this year, although production has accelerated so rapidly in the past three months, coupled with a slowdown in net imports, these metals may form an inventory rather than worry about being consumed. Not surprising.
China's aluminum exports slowed
Looking forward to 2006, it is difficult to give an accurate estimate of China's aluminum supply and demand situation. The output may not be too far away from the current, about 8 million tons, more than 9 million tons, the current production capacity in China is estimated Can reach 10 million tons!
Next year's demand may increase by 10% from 7.5 million tons to 8.2 million tons. From the perspective of net trade, the conclusions may be more volatile. However, China's aluminum net imports should slow down in 2006. Of course, it is purely from the economic interests of the Chinese smelting industry.
The price of alumina has rebounded to more than 500 US dollars per ton. It is hard to imagine that China can continue to export a large amount of aluminum. Of course, not all manufacturers will pay such a high spot price (China Aluminum's price is much lower than International spot market prices), but even so, it is difficult to seek economic benefits from exports.
The economic benefits of smelting in China, September 2005
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Non-receipt processing Non-receipt processing Imports plus domestic demand Exports Export alumina costs Australia CIF ($/t) 500 500 500
International Freight ($/t) 20 20 20
Import Tariff (%) 8% 8% 0%
Import Duties ($/t) 42 42 0
VAT (%) 17% 17% 0%
Value Added Tax ($/t) 115 115 0
Port Price ($/t) 677 677 520
Exchange rate 8.11 8.11 8.11
Port Price (RMB/t) 5,487 5,487 4,217
Port Fee (RMB/t) 80 80 80
Import Price (RMB/t) 5,567 5,567 4,297
Import Price (US$/t) 686 686 530
Shanghai Futures Exchange Price/LME Price% 33.8% 37.9% 29.3%
China Aluminum Price (RMB/t) 4,330
China Aluminum Price (US$/t) 534
Accounting for 26.3% of Shanghai Futures Exchange price
Aluminum's profit alumina cost (imported RMB) 10912 10912 8423
Conversion Cost (RMB) 8000 8000 8000
5% export tax 0 734.15 734.15
Spot cost (RMB/t) 18912 19646 17157
Spot Cost (US$/t) 2332 2422 2115
Shanghai Futures Exchange Aluminum Price (RMB) 16460
Shanghai Futures Exchange Aluminum Price ($US/t) 2030
LME Price (RMB/t) 14683 14683
LME Price ($US/t) 1810 1810
"Profit t" (RMB/t) -2452 -4963 -2474
"Profit" ($US/t) -302 -612 -305
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Source: Macquarie Research, September 2005
The above calculations show that for a typical smelter, the export per ton of aluminum even under the processing license is about $300, and the loss for exporters who have not received the processing license is 5%. 600 US dollars, not to mention that with the advent of the end of the year, most licenses have expired.
Even if the conversion costs of some smelters are low, less than RMB 8,000 per ton, exports are more difficult to consider in terms of pure economic benefits.
Of course, if the price of spot alumina drops significantly, the aforementioned economic interests will change, and exports may become profitable again. In the following table, we show the breakeven point for exports under different spot alumina prices. The cost is still calculated using the data in the above table. It is estimated that only the price of alumina falling to 300 US dollars per ton is recognized (this is obviously Currently, it is impossible at all. China's aluminum export price is not less than $1,900 per ton; at the price of alumina, it is $400-500 per ton, and the export price of aluminum must reach $2,100-2,500 per ton to make a slight profit.
The break-even price of China Aluminum exports at different alumina spot prices
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Spot alumina price (CIF Australia) LME price required
200 1660
250 1790
300 1910
350 2040
400 2170
450 2300
500 2420
550 2550
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Source: Macquarie Research, September 2005 Although Chinese smelters increase new production capacity, aluminum production in China will rise again next year. We believe that the economic interests of smelters are deteriorating and we are experiencing the bitter fruit of blind growth. Next year and future China The aluminum export will be restricted. In the short term, many manufacturers may have to continue production in order to survive. Even if they are in a loss state, of course, from a longer-term perspective, starting from the economic benefits, 5% of export taxes plus alumina processing will be cancelled and alumina supply will remain tight. Combined with restrictions, it will be difficult for Chinese producers to maintain the strong growth momentum of aluminum exports in recent years.
China's export price (after tax) and China's domestic aluminum price comparison