The impact of European electrolytic aluminum production cuts on China's aluminum prices

Today, we are going to introduce you the impact of European electrolytic aluminum production cuts on China's aluminum prices. Now here are some questions and let's get started!

1, With the reduction of production of European aluminum plants, can it bring more development opportunities to Chinese aluminum companies?

Against the background of the trend decline in the overall electrolytic aluminum production in Europe, China's production has continued to pick up since the beginning of the year. According to SMM data, from January to August 2022, the cumulative domestic output of electrolytic aluminum reached 26.547 million tons, an increase of 2.2% year-on-year.

While production continues to increase, the tight supply of overseas has also driven China's electrolytic aluminum exports to continue to increase. According to the latest customs data, in August, China exported 540,400 tons of unwrought aluminum and aluminum materials, down 17.14% month-on-month and 10.22% year-on-year; The cumulative export from January to August was 4.701 million tons, an increase of 31.5% over January to August last year. In the first eight months of this year, China's unwrought aluminum and aluminum exports were at the highest level in recent years.

2, Europe production cuts and production stoppages are so serious, why is China's aluminum prices weak up?

(1) From the demand side. The energy crisis has not only affected supply, but has also caused continued weakness in demand. At present, the global macro environment sentiment is pessimistic, and the poor performance of demand is currently a commonality of the domestic and foreign markets, so the reduction of production of overseas aluminum plants has brought more impetus from market expectations to Chinese aluminum companies at this stage. The overall downstream demand is not good, and the rise in aluminum prices is limited.

(2) Recently, the momentum of destocking of aluminum ingot social inventories has slowed down. On September 19, 2022, SMM counted 685,000 tons of China's electrolytic aluminum social inventory, an increase of 0.8 million tons from the end of August and an increase of 14,000 tons from the end of July.

(3) At present, macro inflationary pressure is large. To fight inflation, the Fed is likely to continue raising interest rates and maintain its highs for some time. The pace of the Fed's monetary policy adjustments, recession fears and geopolitical developments continue to dominate metals.