First, 28 cities in the north will cut aluminum production by 30%

 

On February 28, several departments jointly issued the 2017 air pollution prevention and control plan for Beijing, tianjin and hebei and surrounding areas. In Beijing, tianjin, hebei, shandong, shanxi and henan provinces, a new round of air pollution prevention has been launched.

 

Among them, 26+2 cities need wrong peak consumption during the heating season.

 

The production capacity of iron and steel is limited to 50%(in terms of blast furnace consumption ability, the practical power consumption of enterprises is adopted);

 

The production limit of electrolytic aluminum is over 30%(in the case of discontinued electrolytic cell), the production limit of alumina is 30%(in the case of consumption line), the production limit of all enterprises whose carbon is not up to the standard is over 50% (in the case of consumption line).

 

Aluminum industry chain

 

Second, the aluminum surplus was effectively alleviated

 

Aluminium prices have risen by 12% this year, outpacing gains in copper and nickel. Combined with the production restrictions, will the "aluminium" journey upstream and downstream be more difficult?

 

Let's first look at the effect of production restriction:

 

According to statistics, the operating capacity of electrolytic aluminum in 26+2 cities is about 12.4 million tons/year, accounting for 33% of the total operating capacity in China. The operating capacity of alumina is about 25.1 million tons/year, accounting for 36% of the total operating capacity in China. The operating capacity of aluminium carbon is about 8.3 million tons per year, accounting for 43 percent of the total national operating capacity.

 

Assuming the winter heating season starts in October, the implementation of the work plan in 2017 will reduce the production of electrolytic aluminum and alumina by about 900,000 tons and 1.9 million tons, and the carbon production capacity by 1.3 million tons.

 

Consider supply and demand: China produces more than half of the world's aluminium. This means it has a big impact on aluminium supply, that is, on aluminium prices.

 

Appeared in 2017, according to some authoritative website statistics, 2017-2018 domestic electrolytic aluminum new capacity of about 6 million tons, estimates that in 2017 the domestic electrolytic aluminum production growth of 10% or so, practical consumption growth of 6%, the overall surplus of about 1.33 million tons. In 2016, China produced 32.3 million tons of raw aluminum, with a net import of 30,000 tons and an estimated consumption of about 32.5 million tons, or a shortage of 170,000 tons.

 

In 2016, the world produced 58.34 million tons of raw aluminum and consumed 59.03 million tons, a shortfall of 690 million tons.

 

In 2017, according to statistics, the world produced 62.09 million tons, consumed 61.92 million tons and had an overall surplus of 170,000 tons.

 

Global explicit inventories of aluminium, about 2.32 million tonnes, are less than half their all-time high and are undergoing a de-stocking process.

 

On Feb. 27, bmo capital markets in the global metals and mining conference, President of Alcoa RoyHarvey had predicted that this year China aluminum supply glut on the market 2.1 million - 2.3 million tonnes (1.33 million tons of excess domestic prediction), the rest of the world region may be a shortage of 1.5 million - 1.5 million tons, which means that global excess amount may only in 400000-800000 tonnes (170000 tons of excess domestic forecast).

 

But China's new environmental rules will rewrite that number. Yield reduction of 900000 tons is expected to bring changes in the structure of supply and demand, Goldman sachs wrote in research report, "China's production will lead to the global aluminum market in 2017 and 2018 about 300000 tons a year of supply and demand gap". This change in the expected structure of supply and demand will still stimulate further upward price of aluminium. Goldman sachs also expects aluminum prices to rise to $1,950, $2,000 and $2,100 a tonne over the next three months, six months and 12 months.

 

Third, the supply side of aluminum industry changes

 

Related departments repeatedly raises the beginning of this year, the supply side change and capacity range will be expanded, the non-ferrous metal industry is no exception, as one of the six major industries with excess capacity, electrolytic aluminium in 2017 years of the "supply side change to deepen background, is expected to expand the supply side of the depth change.

 

Still exist at present, the electrolytic aluminium industry built before batch, low-level backward production capacity, such as present situation, the aluminum industry will face a capacity to contract in the future, is likely to take this time to stop the supply side aluminum industry transformation, the short-term measures to shut down, eliminate backward production capacity, last year, China's aluminium consumption enterprise capacity utility ratio at 77%, is low as a whole.

 

Who will benefit

 

Aluminum prices are likely to rise more rapidly in the next six to 12 months due to a few months gap between production cuts and limited price increases in the next three months.

 

Whether it is A short period of production suspension or A future supply-side transformation, companies outside the "2+26" cities, advanced production capacity and standard aluminum enterprises (such as a-share listed companies) will benefit significantly.

 

1) chinalco

 

Chinalco is China's largest alumina company, producing 7.07 million tons of alumina and 2.92 million tons of electrolytic aluminum. More than 80 per cent of chinalco's production capacity is outside this restricted area, with the proportion of exported alumina exceeding 100 per cent, which will directly bear the price increase.

 

2) cloud aluminum shares

 

The production capacity of cloud aluminum is concentrated in yunnan province. There is no environmental pressure for 100% hydropower.

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