The Zhitong Finance App learned that Huatai Securities released a research report saying that aluminum prices continued to be strong in April. From a fundamental point of view, supply and demand for electrolytic aluminum were strong, domestic aluminum ingot+aluminum bar inventories continued to be eliminated, and there was little conflict between supply and demand in the industry, which supported aluminum prices. Meanwhile, at the macro level, the US manufacturing PMI returned above 50 in March, and manufacturing inventories recovered to 0.6% year on year. Domestic policies such as urban village renovation, equipment renewal, and consumer goods trade-in boosted aluminum consumption and supported an upward breakthrough in aluminum prices. Recently, US economic data have been repeated. The manufacturing PMI fell slightly to 49.2 in April, and the number of new non-farm payrolls fell short of expectations, while domestic policies continued to be introduced to support consumption and investment demand. Short-term aluminum prices may fluctuate at a high level, focusing on the progress of the inventory cycle and the extent of inventory replenishment.

The main views of Huatai Securities are as follows:

Demand: Aluminum for new energy and electricity is growing well, and aluminum for real estate shows resilience in terms of demand

According to Huatai Securities estimates, the cumulative domestic consumption growth rate of electrolytic aluminum from January to April was about 8.4%, and the global consumption growth rate was about 4.1%. Overall, aluminum consumption was resilient. In terms of terminal consumption, demand for new energy sources such as photovoltaics and automobiles maintained good growth. In January-March, PV module production was +36%, cumulative PV module production was +26%, automobile production was +5.3%, and NEV was +29.2%. At the same time, demand for aluminum for electricity continued to perform well, with cumulative investment in fixed assets such as electricity +29.1% year over year, and aluminum pole production +33.5% year over year.

On the other hand, aluminum for real estate showed toughness. According to SMM, demand for building profiles picked up markedly in March, mainly due to the gradual resumption of work on projects and construction sites with multiple policy support. Urban village renovation led to an increase in demand for doors and windows. The cumulative output of aluminum profiles was -1.2% compared to the same period, showing resilience in demand.

Supply: Domestic production is resumed in Yunnan, and overseas production capacity has not changed much on the supply side

By the end of April, the domestic production capacity of electrolytic aluminum had risen slightly to about 42.4 million tons, the industry's capacity utilization rate was about 94%, and domestic operating capacity was gradually increasing. As of May 11, Yunnan Province had resumed production at 660,000 tons, and the remaining 630,000 tons were gradually put into production during the flood season in June. Overseas, the operating capacity of electrolytic aluminum in March was about 29.22 million tons, with little change since October 23. Among them, actual production in Europe was reduced by about 870,000 tons in 2021-2023. Currently, production resumed by about 100,000 tons, and production capacity in North America was reduced by 410,000 tons. Currently, production has basically resumed. The additional production capacity mainly comes from Asia and other regions. Overall, Huatai Securities expects domestic electrolytic aluminum production in January-April to be 13.97 million tons, +5.3% year on year, 9.67 million tons of overseas electrolytic aluminum production, +2.4% year on year, and global electrolytic aluminum production of 23.64 million tons, +4.1% year on year.

Cost profit: Profit followed the expansion of aluminum prices and returned to a good level in September '23

As of April 30, the domestic price of electrolytic aluminum had risen to 20,470 yuan/ton, and continued to operate strongly since March. The average cost of the electrolytic aluminum industry was about 17,061 yuan/ton, and since this year it has risen by about 540 yuan/ton. Mainly due to higher alumina prices, anode and electricity costs have dropped slightly. In terms of profit, the profit of electrolytic aluminum widened as aluminum prices rose, and the average profit of the industry reached a high of 4,000 yuan/ton, returning to a good level in September 2023; by province, benefiting from falling coal prices, geographical theory profits such as Xinjiang, Shandong, and Inner Mongolia were relatively weak, while profits in places such as Sichuan, Guangxi, Yunnan, and Guizhou were relatively weak.

Risk warning: downstream demand falls short of expectations, fluctuating raw material prices, macroeconomic policy changes.