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    Aluminum: dispel haze even innovation high

    Author: Published:2015-05-29 Views:1092

    Less flexible production capacity, inventory, and gradually into the peak season, the continued strength of aluminum prices. The fear of the market for aluminum mainly lies in the elasticity of China's electrolytic aluminum production, but as of July, the cumulative output of 7.46%, remained stable. Domestic demand for the first half is expected to reach 14%, September will gradually enter the peak season.
    Xinjiang letter issued a sudden accident of 400000 tons of capacity, become the recent domestic aluminum direct catalyst.
    Expected the shutdown will affect the Xinjiang letter sent 10 million tons of production. At the same time, because of Xinjiang Xinfa aluminum ingot is currently trading market in East and South China, such as the main supply of brand cut would on the market impact.
    Xinjiang next three years of new capacity will be significantly lower than previously market expectations. We expect that 2014-2016, Xinjiang's annual new capacity will be very limited, respectively, add the 143 million tons, 95 million tons and 150000 tons; ended in 2016, Xinjiang electrolytic aluminum production capacity will reach 5.775 million tons, significantly lower than previous market expectations of 800 million tons.
    Although the July domestic succession of electrolytic aluminum enterprises to resume production, but the total volume is not large. From the point of view of Asian metal statistics to resume production, in the first half of the elastic aluminum shutting down capacity about 68 million tons, in the local government requirements and price subsidies stimulate, July onwards's Guizhou company, Zunyi aluminum, aluminum in Liancheng, Gansu Hualu gradually resume production, the total production capacity of about 29 million tons. Aluminum in the first half of shutting down capacity are the cash flow loss, and as far as we know, the local government urged the resumption of production given the price subsidies are short-term policy and linked with the aluminum price.
    We believe that, under the current aluminum industry, large-scale production conditions are not ripe. First, local government subsidies is short-term, local policy, does not support large-scale production nationwide. Second, investment on industry the controlled variable is not the aluminum price, but the price down, and the direct purchase of electricity, electric network is cut is still in the tug and negotiating with the State Grid equivalent to unrealistic, short-term resumption of production decision is finalized. Third, aluminum prices there is no stable in can make the enterprise profit level for a time, consistency of price expectations are not formed, expect the industry generally pessimistic, which also makes the resumption of production decision to make. Fourth, the single tons 1500 yuan the resumption of production cost for the current level of profitability, financing ability weak electrolytic aluminum enterprises is not a small expenditure, the resumption of production existing manufacturers are only blood transfusion by the government reluctantly opened was proof of that.
    Overseas aluminum production continued to decline, the high cost of production exit continues, strong backwardation. According to the International Aluminum Association statistics, in July 2014 the original aluminum production in the field area of China was only 2161000 tons, down 1.3%, 2014 1-7 month fell by 1.7%. In August 2014, Alcoa announced Brazil, Italy's two high cost of electrolytic aluminum plant closed permanently, annual production capacity of respectively 9.8 million tons, 15.1 million tons. Also, sources said Rio for the fourth quarter of this year arrived in Japan aluminum premium offer for $420 per tonne, a record high, compared to the third quarter increases the level of 3-5%. Japan is Asia's largest aluminum importer, the country's quarterly imports of aluminum than LME backwardation is generally regarded as regional aluminum premium benchmarks.
    Aluminum prices continued to rise to strong, positive configuration performance elasticity of the A shares of aluminum target. Picking logic has three criteria: one is owned electricity high proportion, high proportion of coal purchased, can fully enjoy the decline in coal prices brought about by the cost of electricity down; the second is the high share of production capacity of electrolytic aluminum can greatly enjoy aluminum prices, reduce the cost of profit margins expand; the third is bauxite resource self-sufficiency rate is high to prevent medium-term Indonesia banned mine brought rising costs. Four is the concept of high purity of the gradual fermentation, the aluminum price increases on the basis of Xinjiang and has a strong valuation of elasticity. It is recommended to focus on: Jiaozuo Wanfang, Yunlvgufen, Chinese aluminum, Shenhuo shares, Zhongfu industry, Xinjiang public and target.
    Risk tip: 1) hindered the recovery of the global economy; 2) than expected China's electrolytic aluminum production capacity to resume production; 3) exit QE, U.S. interest rates than expected.