Thanks To China，the Global Aluminum Market Has Finally Ushered In A Turning Point
Aluminum prices across the board, which said China's winter production, will cause the global aluminum production to reduce the annual 4 million tons, affected by this, the next two years the global aluminum market will be oversupply, to a small supply shortage.
March 8, the media reported that China will be part of the region iron and steel, electrolytic aluminum, alumina limited production. According to NetEase reported that the Chinese Ministry of Environmental Protection and other four ministries and 6 provinces and cities in late February has jointly issued the "Beijing-Tianjin-Hebei and the surrounding areas in 2017 air pollution prevention and control work program." Work program requires Shijiazhuang, Tangshan, Handan, Anyang and other key cities in the heating season iron production capacity of 50%, around the heating season electrolytic aluminum plant limited production of more than 30%, alumina business limited about 30%.
Goldman Sachs said, in addition to reducing air pollution, the reduction of aluminum production capacity will also provide a supporting role for the Chinese economy, which may help to improve China's aluminum plant profits, thereby improving the bank's balance sheet. This raises the possibility of China implementing aluminum production capacity.
Goldman Sachs pointed out that, in fact, the current aluminum is already following the coal, steel supply side of the next goal of reform.
Goldman Sachs research shows that the aluminum industry is following the iron and steel, coal and chemical industry, the worst case of bad debts in an industry, including the aluminum industry after the leverage ratio of steel and coal industry. In the past two years, these three industries have experienced the supply side of the reform.
Now, there is clear evidence that China will reduce aluminum production capacity in the winter. Goldman Sachs expects that this will result in a 4 million tonnes reduction in aluminum production, or 1 million tonnes expected in 2017, down 2 million tonnes in 2018. Based on Goldman Sachs estimates, this will result in the global aluminum market in 2017 and 2018 there are about 235KT and 373KT gap, and before Goldman Sachs is expected to exist around the global aluminum industry 167KT and 561KT surplus.
Goldman Sachs believes that the supply gap, coupled with the aluminum products used in the upstream prices, will result in higher than expected profits across the industry. So Goldman Sachs raised the price of 3 months / 6 months / 9 months expected to $ 1942 / ton, 2000 US dollars / ton, 2100 US dollars / ton. Goldman's expectations for 2017 and 2018 are $ 1942 / ton and $ 1950 / t. At present, LME aluminum prices are about 1877 US dollars / ton.
Aluminum bauxite and carbon for aluminum has risen a lot in recent months, and Goldman Sachs believes prices will continue to rise.
In the next three months, Goldman Sachs is expected to rise in aluminum prices, mainly that China and the global economy to pick up, the global PMI and China's credit data have recently been picking up. However, at present, aluminum prices by the aluminum industry to the impact of production prices or will be relatively small, because it may be to 6-7 months later, the actual output gap may appear. But from 6 to 12 months of the length of time, the prospect of aluminum prices is considerable.
The analysis, on the one hand, if the government is expected to perform to the production capacity, then there may be further aluminum prices up space. However, the downside risk of aluminum is that China's economic slowdown may lead to weakening demand.